Tax Free Savings Account or just regular saving account - Scotia Bank?

[draxz1289]

I have the Money Master saving account with Scotia Bank along with my checking account. I was wondering if it would be better for my keep the saving account or get a tfsa (cash). I would be contributing say 50$ very month to the tfsa. Is there also any fees associated with the account when I withdraw.


And is the TFSA like just another account where I can say contribute 100$ today and withday 50$ next week



Thank you

[DebbieL]

TFSA is a bit of a misnomer. Think of it like an RRSP in the sense that you can hold all the same types of investments in your TFSA as you could in an RRSP. It isn't just for a bank account (and a bank account isn't a very efficient use of the TFSA). The benefit to TFSA as opposed to RRSP is that you will never be taxed on the earnings within it when you withdraw them. Another advantage of TFSA is that you can withdraw some in one year, and the contribution room opens up for you again the following Jan 1. With RRSP, once it is withdrawn you lose contribution room. Your withdrawals will never be counted as income (when people have large RRSPs it often works against them as certain government benefits get reduced or eliminated based on the RRSP withdrawals in retirement).

To answer your question, if you choose to put your TFSA money into a bank account, then yes, you can withdraw it anytime you like (but if it is maxed out for the year you wouldn't be able to contribute it back until the next year). However, at the small rate of contribution you are talking about there is no chance of it being maxed out anyways. Why would you want to put money into a TFSA if you just plan to take it back out again anyways? To me, the TFSA is a great retirement savings vehicle - I wouldn't touch it unless I was desparate. I have my TFSA in a Questrade trading account. Yes, you can lose money in the market, but the potential for gains is much more than sticking it in a bank account. Good luck to you!

[draxz1289]

Hello,

I would not be going over the 5000$ at least till I find a proper job, I can contribute only 50$ a month.

In terms of taking out the money say one month I am short on my checking account I then transfer some money from my saving account. I dont know if its a good idea to open a TFSA - cash since I will be contributing only 50$.

Is there a minimum to it or can I contribute less than 50$


Do you think I should just keep the saving account since it gives me a flexibility.


Sorry about the double post.

[DebbieL]

There is no minimum. Again, it just depends what you are putting it into. For example, if you opened up a Questrade account, and decided you want to purchase a particular mutual fund, some of them have a $500 minimum initial purchase, etc. For a TFSA that is just a savings account there is no minimum. At your income level just make sure you are banking with someone who has free accounts (such as President's Choice Financial - who I've been with for over 10 years and recommend).