Usually it is impossible to have savings plus investment options under one umbrella as it reduces taxes of the government. However, TFSAs (Tax Free Savings Accounts) providesan opportunity for each millennial to save money on their own and invest the same. Moreover, income through these investments is kept tax free.
The usual impression is millennials are carefree and have no control over their spendings. Their expenditure pattern invites lots of critics from social as well as government organisations. However, contrary to the popular belief, TFSAs have brought a paradigm shift in manner in which how young citizens save their money to build enough capital for their retirement.
The TFSA Savings Policy
TFSAs are a policy driven measure taken by the government to inspire young guns of the country towards savings and investment. The idea behind promoting TFSAs is to help millennials save enough for their retirement to ensure government would not have to spend money on their maintenance during their old days.
Tax-Free Savings Account
Tax-free savings accounts are something more than just a casual savings account. TFSA withdrawl rulewas introduced in 2009 for adult citizens. Initially it allows $5500 to be deposited in the account in the first year. The same amount is getting invested in various government schemes. The attractive part of the TFSAs is their returns are completely tax-free and these incomes invite no tax from the government.
The Big Advantage
If you have a patience to build a rock solid income base, TFSAs interest rates are no less than a blessing. It allows you to accumulate the cash in your saving accounts and the process of building handsome cash base for the future is quicker compared to other investment options, as under TFSAs, you earn compounding interest on the investments.
In simple terms, if you start investing in TFSAs at the early age, and do not touch the money accumulated under Tax-free savings account, you can gain as much as 48% in interest over 40 years.
Moreover, the investment/income ratio is not restricted under TFSAs. Therefore, it provides a large room for you to invest a major part of your income under TFSAs.
Last but not the least, the return that comes to your account has already been taxed; hence, it invites no additional income tax when you withdraw the money accumulated under TFSAs.