Quote:
Originally Posted by Greenstoner
Is there a difference between Saving account or Tax free saving account ?
If there is a difference, should I be opening a tax free saving account then ?
|
Lets separate the terms first:
- Savings account is an account that pays a decent (3%) interest rate.
- The TFSA is poorly named. Its a tax-free account that you can save money. It does not have to be a traditional "savings account" paying only interest from the bank. It can be used to hold mutual funds, stocks, bonds, ...
Here's a good plan for you:
1. Keep your current account as a chequing account.
2. Open an "online only" savings account (at the same bank).
3. Open a TFSA (at the same bank), use it to hold mutual funds
4. Practice transferring money from your chequing account to your savings account regularly. Every paycheque, logon to your bank accounts and transfer money. Its easy, I do this every paycheque.
5. Then setup a regular transfer from your savings account to your TFSA to buy more mutual funds
6. If you save > $5K/yr, setup either an RRSP and/or regular investment account. Then setup a regular transfer to these accounts.
I suggest mutual funds cause you seem to have limited financial knowledge and this would be a good start. As you learn more you can invest better.
This is exactly what I do. Every paycheque I transfer money into my savings account. Anything in excess of my "rainy day limit" (3 months salary) gets transferred to my TFSA, RRSP, or non-registered investment accounts, or none at all if I made a large purchase and need to replenish my "rainy day limit".