TORONTO, ONTARIO--(Marketwire - June 15, 2012) - This graduation season, rather than opting for a traditional gift for the new grad, consider investing in their financial future by contributing to their Tax-Free Savings Account (TFSA).
Introduced in 2009 by the federal government, TFSAs allow investors to save and invest up to $5,000 per year without paying tax on any interest earned or withdrawals. TFSAs have several benefits, including:
- Tax-free compounding that allows deposits to grow quickly
- Investments are not taxable, and there are no taxes on withdrawal amounts
- There is no minimum contribution required to start a TFSA
"Teaching young adults how to invest for the future is one of the most valuable gifts you can give," said Larry Moser, Regional Sales Manager, BMO Bank of Montreal. "A TFSA is also a great way for young investors to start learning about how taxes can affect investment income."
According to a BMO study, conducted by Leger Marketing:
- Two-thirds (64 per cent) of Canadians are knowledgeable about TFSAs, while 44 per cent currently have a TFSA
- The average annual TFSA contribution is $3,700
Furthermore, Mr. Moser added that TFSAs are an effective way to save for both short- and long-term goals, especially since the investor is not penalized for withdrawing savings from the account.
- Canadians aged 18 and older can contribute up to $5,000 per year into a TFSA. Any unused contribution room from the previous year can be added to the contribution room for the following year. In addition, any withdrawals can be re-contributed the following year without affecting your annual contribution limits.
- You can hold the same investments in a TFSA as you could in a Registered Retirement Savings Plan (RRSP), including GICs, bonds, cash, mutual funds and stocks.
- Contributions to TFSAs are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.
To learn more about BMO's TFSA offering, please visit http://www.bmo.com/home/personal/banking/investments/tax-free/tfsa.
The survey was completed on-line from October 17th to October 20th, 2011, with a sample of 1508 Canadians, 18 years of age or older. A probability sample of the same size would yield a margin of error of 2.5 per cent, 19 times out of 20.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.