What Should You Do With Your Tax Free Savings Account?

If you don’t already have an emergency fund, you should consider starting one right away. A TFSA can be a great way to accomplish this since the money is normally easy to get when needed and your savings will grow tax free.

You can re-use your contribution room as well. So, if you put in $5,500 this year, but then you have an emergency later, and you withdraw $2,000 of it, you can put that $2,000 back in next year. You can even roll over your contribution room over year to year. So, next year, you can contribute $7,500 if you want to make up for the previous year’s contribution room, plus use this year’s.

The TFSA is a great place to keep money that you want to be reasonably liquid, since it allows you to take advantage of investment returns with a tax advantage, and you don’t have to worry about penalties for early withdrawal.

Save Up For Annual Expenses With Your TFSA

Maybe you have large annual expenses like property tax or insurance? Maybe you just want to start saving towards next Christmas? Contribute to your Tax Free Savings Account each month so that you’re prepared for when these bills are due. Just like the TFSA is a great place for an emergency fund, it’s also a great place to increase the tax efficiency of your planned annual expenses. Earn a little bit higher return on the money so that it’s doing something for you until it’s needed.