What can you hold in a TFSA?<\/h3><\/div>Cash<\/h4>
Most people choose to open a TFSA savings account at a bank or credit union as it\u2019s the safest and most flexible option. It works like a regular savings account, so you can deposit and withdraw cash whenever you want (as long as you stay within your contribution limit). The only difference is that any interest you earn will be tax-free.<\/p>
Guaranteed income certificate (GIC)<\/h4>
Another low risk investment you can hold in your TFSA is a guaranteed income certificate<\/a>. You earn interest over a period, which can range from as little as 30 days up to 10 years. You won\u2019t pay tax on this interest if your GIC is in your TFSA, but there will be fees or restrictions if you want to withdraw your funds early.<\/p>Bonds<\/h4>
You can purchase bonds<\/a> from government and corporate entities and earn interest when they mature at the end of the term, which can range from 1 to 30 years. Government bonds are typically considered less risky, so they often offer a lower rate.<\/p>Mutual funds<\/h4>
If you want to diversify your portfolio, consider purchasing a mutual fund, which allows you to pool your money with other investors to invest in a collection of assets, including bonds, ETFs and stocks. You pay a fee to the financial institution or portfolio manager managing your mutual funds, but your interest and capital gains will be tax-free in your TFSA.<\/p>
Exchange traded funds (ETFs)<\/h4>
An exchange traded fund<\/a> is a collection of stocks and\/or bonds that you can trade on stock exchanges. ETFs are similar to mutual funds, but they\u2019re typically managed by an algorithm rather than a person.<\/p>Stocks (including US stocks)<\/h4>
One of the highest-risk investments you can keep in your TFSA is in stocks<\/a>, which can lead to a higher rate of return. Just be sure the stocks you purchase for your TFSA are listed on a designated stock exchange, or you\u2019ll be penalized 50% of the stock\u2019s value.<\/p>\n \nDive deeper: <\/span>Guide for how to invest in US stocks<\/a>\n<\/div>\n<\/article>How to open a tax free savings account<\/span><\/h3>To open a tax-free savings account, follow these steps:<\/p>
- Decide on how you want to save or invest.<\/strong> You can open a TFSA and use it just like a traditional savings account, but you can also opt to invest in a GIC, ETF, stocks or bonds. Think about your financial goals and whether you need your savings to be easily accessible.<\/li>
- Choose a financial institution.<\/strong> From banks, credit unions, online trading platforms and robo-advisors<\/a>, your options are endless for choosing where you want to open your TFSA. Do your homework by comparing accounts and interest rates to find the best choice to suit your needs.<\/li>
- Open your account.<\/strong> Once you\u2019ve decided on who you\u2019d like to bank with, get in touch to open your account. They will serve as the issuer of your TFSA. It shouldn\u2019t take more than 20 minutes to complete if you have all the documentation ready. When you\u2019re all set up, you can begin making contributions right away.<\/li><\/ol>
Compare online trading platforms offering TFSAs<\/h3>\n \n <\/div>\n \n \n
Cash<\/h4>
Most people choose to open a TFSA savings account at a bank or credit union as it\u2019s the safest and most flexible option. It works like a regular savings account, so you can deposit and withdraw cash whenever you want (as long as you stay within your contribution limit). The only difference is that any interest you earn will be tax-free.<\/p>
Guaranteed income certificate (GIC)<\/h4>
Another low risk investment you can hold in your TFSA is a guaranteed income certificate<\/a>. You earn interest over a period, which can range from as little as 30 days up to 10 years. You won\u2019t pay tax on this interest if your GIC is in your TFSA, but there will be fees or restrictions if you want to withdraw your funds early.<\/p> You can purchase bonds<\/a> from government and corporate entities and earn interest when they mature at the end of the term, which can range from 1 to 30 years. Government bonds are typically considered less risky, so they often offer a lower rate.<\/p> If you want to diversify your portfolio, consider purchasing a mutual fund, which allows you to pool your money with other investors to invest in a collection of assets, including bonds, ETFs and stocks. You pay a fee to the financial institution or portfolio manager managing your mutual funds, but your interest and capital gains will be tax-free in your TFSA.<\/p> An exchange traded fund<\/a> is a collection of stocks and\/or bonds that you can trade on stock exchanges. ETFs are similar to mutual funds, but they\u2019re typically managed by an algorithm rather than a person.<\/p> One of the highest-risk investments you can keep in your TFSA is in stocks<\/a>, which can lead to a higher rate of return. Just be sure the stocks you purchase for your TFSA are listed on a designated stock exchange, or you\u2019ll be penalized 50% of the stock\u2019s value.<\/p> To open a tax-free savings account, follow these steps:<\/p>Bonds<\/h4>
Mutual funds<\/h4>
Exchange traded funds (ETFs)<\/h4>
Stocks (including US stocks)<\/h4>
How to open a tax free savings account<\/span><\/h3>
Compare online trading platforms offering TFSAs<\/h3>