TFSA stands for a Tax Free Savings Account.
The account basically allows you to save and invest without having to pay any taxes on the returns you generate from those investments. The government created the TFSA as an incentive to help Canadians save. Similar to an RRSP, it is a way to structure your investments that has tax benefits.
It is important to know, is that it is not just a high interest savings account at the bank and you can hold a lot of different investments at different institutions inside your TFSA. (Please refer to - A common misunderstanding, and TFSA - Not your average bank account)
What people often overlook is that you can hold a wide range of investments inside your TFSA for example...
- Stocks
- Bonds
- GIC's
- Mutual Funds
- And many more!
The common case seems to be that people have a high interest savings account at a bank and are unaware that they can invest in different things. You can also have many accounts and are not limied to just one, as long as you dont go over the limit.
Here is a useful chart that further describes the TFSA.
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