You need to save for a wide variety of items and services throughout your lifetime. In the Government of Canada’s budget in 2008, they provided a significant incentive for you to engage in such savings by introducing the Tax Free Savings Account (TFSA), which went into effect for the 2009 taxation year. The TFSA allows you to save while accumulating your earnings within the plan tax-free.
What is a Tax Free Savings Account?

Taking effect in 2009, the Government of Canada introduced a new concept called the Tax Free Savings Account (TFSA). If you are already familiar with the existing popular Registered Retirement Savings Plan (RRSP), think of the TFSA as working in reverse from a tax standpoint. An RRSP is a tax deferred vehicle. Money is contributed into an RRSP with pre-tax dollars and the withdrawals are taxable. A TFSA, however, uses after-tax dollar contributions but the withdrawals are tax-free. Both have the common benefit of tax-free accumulation within the plan. One major advantage of a TFSA is that any withdrawal automatically triggers an equal amount of contribution room. That means that you can save for a particular goal, withdraw the savings when needed, and recontribute the same amount again in the future.

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