The Tax-Free Savings Account (TFSA) is one of the most powerful financial tools available to Canadians. It provides an opportunity to grow your investments tax-free, making it an essential component of a strong financial plan. This article will explore 10 important aspects of TFSAs to help you maximize savings and avoid costly mistakes.

1. What Is a TFSA?

A TFSA is more of an investment account than a regular savings account. You can invest in stocks, bonds, mutual funds, ETFs, and more. Your money grows tax-free, and withdrawals are also tax-free.

2. Are Contributions Tax-Deductible?

No. Unlike RRSPs, TFSA contributions are made with after-tax dollars. However, withdrawals—including any growth—are completely tax-free.

3. How Much Can You Contribute?

The 2025 TFSA limit is $7,000. If you were 18 or older in 2009 and never contributed, your total contribution room in 2025 is $102,000. You can check your limit through the CRA My Account portal.

4. What Happens If You Over-Contribute?

Exceeding your limit results in a 1% penalty tax per month on the excess amount. Keep track of your contributions to avoid this costly mistake.

5. Can You Withdraw Money Anytime?

Yes, TFSA withdrawals are tax-free. However, if you withdraw funds, you must wait until the next year before recontributing that amount unless you have unused contribution room.

6. Can a TFSA Hold Investments?

Yes! You can invest in stocks, bonds, mutual funds, ETFs, and GICs—similar to an RRSP but without tax consequences when withdrawing funds.

7. What Happens If You Move Abroad?

You can keep your TFSA, and your investments will continue to grow tax-free. However, as a non-resident, you cannot make new contributions, or you'll face penalties.

8. Can a TFSA Be Used as an Emergency Fund?

Yes, but it’s not always ideal. If used for emergencies, keep safe, liquid investments like high-interest savings or short-term GICs. For long-term growth, invest in higher-return assets.

9. What Happens to a TFSA After Death?

Name a successor holder (spouse or common-law partner) to transfer your TFSA without affecting their contribution room. If you name a beneficiary instead, they receive the funds tax-free, but future growth becomes taxable.

10. How Can You Make the Most of Your TFSA?

Maximize contributions, invest for long-term growth, and avoid over-contributions. A TFSA is a powerful tool when used strategically.

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Understanding how to properly use a TFSA can be a game-changer for your financial future. It offers tax-free growth, flexibility, and a powerful tool for both short-term and long-term financial goals.

For more insights on financial planning, check out our other videos on TFSAs. If you need professional guidance, we offer fee-for-service retirement planning—reach out to our office or visit our website at www.parallelwealth.com.

 Want a deeper dive? Watch our full video on TFSAs below.

Parallel Wealth Financial Group Inc. is based in Langley, British Columbia with offices in Calgary, Alberta and the Niagara region in Ontario. We are here to serve Canadians with their financial planning needs.