Working towards financial security is a great way to enjoy your present life while planning for the future.
The first thing to do is to take better control of your money. Start reviewing your financial situation to know where you are and the difficulties you face. Then, create a budget and get rid of your bad debts.
Once you've established your financial position and created a budget, you can start building a financial buffer for emergencies and start saving money to set aside for your goals (retirement, children's tuition, buying a home, etc.). While there is no perfect age to start saving money, you should start as early as possible.
To better prepare for your future and reach your goals quicker, it's important not only to save money, but also to invest it. When investing, an important factor to consider is your age, as it will help you better set up your asset allocation strategy.
One of the greatest advantages of using investing to build your wealth is that you can use different kinds of financial products, as investing is quite flexible.
The TFSA or - a simpler option to save money with taxation benefits in Canada
Introduced to Canada in 2009, the TFSA (Tax-Free Savings Account) program was implemented to allow people over 18 years old 'to set money aside tax-free throughout their lifetime'. The best thing is that you do not have to be a big saver to start using a TFSA.
TFSAs have become increasingly popular since its introduction, with the Bank of Montreal declaring that 54 percent of Canadian adults owned a TFSA in 2016.
The Tax-Free Savings Account isn't a classical saving account
While a TFSA account sounds like a saving account, it is rather an investment account for saving purposes - as withdrawals are tax free, these accounts allow for tax-free growth of your investment income and capital gains.
In a TFSA account, you can use different . Cash, bonds, certain shares of small business corporations, mutual funds, and securities listed on a designated stock exchange, as well as guaranteed investment certificates are all allowed financial products as explained by the official website of the Government of Canada.
Why are people using a TFSA?
People have different reasons to start saving and investing, but the TFSA can help them reach objectives faster, according to the Royal Bank of Canada. For the RBC, people use TFSAs mostly to:
- Reduce their taxes
- Save for a specific goal
- Save for (and/or during) retirement
- Split income with their partner
- Maintain eligibility for government programs like Old Age Security (OAS) or the Goods and Services Tax (GST) credit.
To maximize your saving and investment potential, you need to find the right solution. But matching your financial situation to relevant saving and investment options isn't always easy.
Building savings and watching your money grow is, however, quite rewarding. So even if you are on a budget, start saving whatever money you can, so then you can invest it and make it grow.
The tax-free saving account (TFSA) has been created to help Canadians save money and build their wealth faster by protecting their investment from taxes.
