Every year, Canadian residents who are 18 years of age or older can invest a maximum of $6,500 into their tax-free savings account. This TFSA is used as a registered investment account that is designed to help Canadians save money and also hold investments.
If you open a TFSA with the help of a financial institution, you contribute to qualified investments. You don’t need to pay tax on the money you withdraw from your TFSA.
You can also use the tax-free savings account to invest in segregated funds, mutual funds, exchange-traded funds, and insurance GICs.
When you want to save but need easy access to cash, have started working, or have some financial goals in mind, TFSAs can work for you.
You have to be a Canadian resident age 18 or older to open a tax-free savings account. You require a valid Social Security number. When you are a non-resident of Canada, you can open a TFSA with a Social Insurance Number as soon as you cross 18 years of age.
The contributions you make in a TFSA account as a non-resident are subjected to a 1% tax every month. There are also additional taxes applicable for non-residents.
Investors can withdraw from the tax-free savings account whenever needed. But you must check that your investments within your account don’t have any withdrawal restrictions.