TFSA Success Stories: How to Make the Most of Your TFSA

A Tax-Free Savings Account, or TFSA, can be a powerful tool to help you reach your financial goals. As the name implies, it’s a tax-advantaged savings account intended to help Canadians build their wealth — whether they’re saving for retirement, planning a big-ticket purchase or working toward another goal entirely.  

No matter how you plan to use your savings, understanding how a TFSA works can help you create your financial plan. Here’s how three Canadians used their TFSA to create a brighter financial future — plus, tips to make the most of your tax-advantaged savings.  

Gaining tax benefits on a savings journey

One of the key differences between a TFSA and a standard savings account is its tax-advantages. You won’t be taxed on interest or dividends earned on the account, or pay capital gains tax if the value of your investments go up.

That’s why Mia, age 40, first opened her TFSA back in 2009. “Really, [my TFSA] was just an account for me to save money,” she explains. “I loved the fact that any growth on my investments in the account was tax-free. Of course, the money I invested was after-tax dollars.” 

Another bonus? You can make tax-free withdrawals at any time and regain that contribution room the following tax year. That means you can use the money in your TFSA over and over throughout your life, no matter where you are in your financial journey.     

Setting savings goals that can evolve with you  

Another key perk of a TFSA is its flexibility. Unlike a Registered Retirement Savings Account (RRSP) or First Home Savings Account (FHSA) — which are intended to save for retirement or purchasing a first home, respectively — you can use the money in your TFSA for a range of financial goals. And you can even start saving without a specific goal in mind at all.  

“[When I started using my TFSA,] I didn’t really know what I was saving for but I knew I wanted flexibility,” explains Alejandro, age 32. “The account worked for me because I could put money away but still access the funds, if needed.” 

Alejandro ultimately ended up using his savings to help fund his education. But you can withdraw from your TFSA for goals at different stages of life, too. 

Mia, for instance, used her TFSA to help pay down her mortgage. “I decided to withdraw money from my TFSA to put towards my mortgage. The great thing about this, my money has grown from my investments, giving me more to work with,” she explains. “Also, I love that I can replace the money I took out, as soon as I get that mortgage paid down!” 

Planning for the unexpected

Your TFSA can help fund your retirement, too — which was the goal for Sachin, age 59, who was around 50 when he opened his first TFSA. Initially, he used the TFSA to augment his retirement savings, as he continued to contribute to his RRSP. 

But when he needed a little extra cash, his plan for the TFSA changed too. 

“A few years ago we were invited to a “destination” family wedding. I dipped into my TFSA to fly my family to the wedding,” he says. “It was also a bonus that I didn’t lose the contribution room. I waited a few months and was able to put the amount I used back in the next year.” 

How you can make the most of your TFSA   

Try these four tips to make each dollar in your TFSA work hard for you 

1. Set up a savings goal 

The earlier you start contributing money to your TFSA, the longer your savings will have to grow. There’s no such thing as “too small” when it comes to savings goals — and even setting aside $25 a month can help establish a habit of saving. Make saving effortless by setting up a Pre-Authorized Contribution (PAC) to automatically transfer funds into your TFSA.  

2. Consider using the account to invest 

Since a TFSA allows you to earn interest and returns tax-free, consider investing the money to give your savings a chance to grow. There are different ways to invest depending on your preferences and goals, so seek out a strategy that works for you.  

3. Keep track of your contributions  

Unfortunately, you can have too much of a good thing when it comes to contributing to your TFSA. The government sets contribution limits on your TFSA, which can vary depending on your age. Exceeding the contribution limit can result in penalties, so ensure your total TFSA contributions — across each of your TFSA accounts — remain within the contribution limit.   

Pro tip: You can view your remaining TFSA contribution room by logging into the Canada Revenue Agency’s (CRA) My Account portal.

4. Use your TFSA as part of a larger savings plan   

Chances are, you’ll juggle multiple financial goals throughout your life, so it’s important to think big-picture when you’re planning how to use your TFSA. Canada offers multiple tax-advantaged savings accounts that you can use to save for the future — and Sachin, for example, focused on saving for retirement in his RRSP before contributing to his TFSA.  

As you create your savings plan, get to know the similarities and differences between a TFSA, RRSP and FHSA so you can reap the most benefits from each account and create a well-rounded savings plan.  

Get help to make your TFSA work hard for you 

Whether you’re just starting your savings journey or you’re already an experienced saver, an advisor can help you establish — or refine — your savings plan to achieve your financial goals.  

To get started with a TFSA, and work toward a bright financial future, you can start small, Start Online or Book an Appointment to speak with an advisor. 

*Names and identifying details have been changed to protect the privacy of individuals. 

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