Growing Your Wealth—Tax-Free
A man looked at his newly built home. It was beautiful, rising high on the crest of a hill. His wife said: “Dear, let’s plant a tree.” And he replied, “We won’t be here long enough. It takes years and years for a tree to grow.”
They lived in their beautiful home for a decade, then two decades and then three. His wife looked longingly out of the window and imagined a beautiful shade tree or two on the front lawn. But now, retirement was nearing. Now was not the time to plant a tree.
There is an old proverb that says: “The best time to plant a tree is twenty years ago. The next best time is now.”
Wealth management is much the same. The best time to start was twenty years ago. But the second-best time is now.
One of the most flexible and easy-to-manage tools for growing your financial wealth is a Tax-Free Savings Account (TFSA) at Northern Birch Credit Union. A TFSA is a great way to begin your journey of making your money work for you. It’s easy to start, manage and is flexible to your needs.
You are eligible to open a TFSA if you are a Canadian resident and at least 18 years old. Your contribution is limited by the Canadian government with a contribution rate set annually, your age and your residency. In 2023, the maximum contribution is $6,500.
If you do not have a TFSA, you are 33 years old or older and have lived in Canada the entire time, you can contribute up to $88,000, as the contribution accrues for as long as you qualify. There is no maximum age.
Unlike RRSPs and Mutual Funds, TFSAs are extremely flexible.
If you need the funds, depending on how they are invested, you can withdraw them. Withdrawals from the plan do not impact your taxable income, as you have already paid tax on the funds before the funds were contributed into the TFSA plan. The gains you earn are tax-free, so withdrawals do not impact your income taxes due. Removing the funds does not impact your total eligible contribution. You can recontribute the money anytime you want as long as you don't exceed your personal amount. There is no limit to or penalties for withdrawing funds.
Your TFSA can hold multiple investments, again, tax-free. Think of it as a folder or box to hold different financial products. There are many different ways to invest in your TFSA, and depending on how you invest, you can receive a higher return than an ordinary savings account and still have access to your funds.
Some people choose to set up more than one TFSA to use them for different purposes. Having more than one TFSA does not increase your annual contribution. You must split the contribution between the accounts, but it may help you organize your finances in a way that makes it easy to reach your goals.
If you are considering putting money into a TFSA in January 2024, take advantage of our Early Bird TFSA Saver GIC, available to our members at Northern Birch Credit Union. We will put your contribution in a short-term GIC earning 7% interest until December 31, 2023. On January 1, 2024, we will move the contribution to your Northern Birch TFSA, putting the interest earned into the account of your choice. Remember, the earlier you invest the more interest you accrue. While the interest for the short-term investment is taxable, it’s a great way to make your money work harder and smarter.
Saving does not need to be arduous. Start small. One member started their TFSA with an investment of $500 and then committed a payment into the account of $5 a week – not even a dollar a day. Over the years, the account grew into a very nice nest egg, giving him and his family increased financial security.
We have the legacy of our parents and grandparents, many of whom planted trees when they had little hope of seeing them grow to maturity. They planted trees for future generations, believing that they would grow strong and tall. They also planted the seeds of financial wealth by investing their money wisely – even though they had very little. They planted the roots of Northern Birch, believing in a future that was financially strong.
We encourage you to take advantage of the Early Bird GIC at Northern Birch. If you already have a TFSA, simply call member services and we will set up the investment for you.
If you haven’t opened your Northern Birch TFSA plan, call your member service representative today – they can set it up for you. If you’re not a member of Northern Birch yet, come in and open an account. Our no-fee and low-fee chequing and savings accounts are a great starting point for growing your wealth.
Call 416-465-4659 to set up or contribute to your TFSA or visit one of our branches at your convenience.
