This may be a practical one. the concept of saving is real lead to be rich nut depends how to use it.

inflation kills about half of that earning.

As per example #4 above. How is the earnings affected if the contributions are made out of every weekly paycheck all year long. Again, the interest is compounded on an annual basis. If I have a balance of $1000 accumulated contributions plus interest at the end of 2008 and make weekly contributions all through the year 2009 totaling $800, what will be my total accumulated contributions plus interest as of 12/31/2009 and how is it calculated? This is SOOOO IMPORTANT!

Please explain why and how contributing to a savings account just before the end of each year earns less interest than contributing at the beginning of each year. Assume the interest is compounded annually as in item #4 above.

people, you are getting confused with the 5.5% return! it is the return on investing your TFSA with mutual funds /stocks just like a RRSP can. the 1-3% returns people here saying the banks are offering are high interest savings account within the TFSA. You can invest in mutual funds too and 5.5% is a reasonable rate of return over time.

To get the 5% or more interested find a high yield mutual fund and invest in it. my current Mutual fund has a yield of 6.5% and is professionaly managed. On top of the 6.5% the markets are down, which means I can also make money off if the stocks held in the Mutual fund go up, also stocks that pay high dividends are more protected when the markets go down. Yes Higher risk, but I'm willing to take it

TFSA accounts can hold any type of investments: GICs, stocks, mutual funds, etfs, index funds.

The 5% return assumption is perfectly reasonable over the long term.

Ok so I'm at a bit of an advantage. I am a tax accountant with about 5 years experience. So TFSAs aren't necessarily any better than an RRSP and often aren't as good. Think of it this way earn $5,000. If put into an RRSP $5,000 goes in. If into a TFSA only $3,000 goes in (assuming 40% tax rate). Over 3 years have that money double. $10,000 in RRSP comes out at 40% tax so there is $6,000 left. $3,000 of TFSA doubles also giving you $6,000. If the tax rate is still 40% when you pull it out you will have no difference between RRSP and TFSA (TFSA = tax at beginning which is equal to RRSP = tax at end if tax rate doesn't change). So the only financial benefit of a TFSA is if your tax rate actually increases when you go to remove it (which for most of us isn't likely as tax rates tend to go down in retirement unless you over invest in RRSPs getting the value about $500,000 which will lead to top rate tax on the withdrawal). So unless you don't want to lock money up in an RRSP (a legit idea) I would stick with RRSPs first until you run out of room. Also note TFSAs are nice if you don't have active income which generates RRSP room.

P.S TFSAs don't have to be tied to a bank investment. I would highly recommend a strategically diversified portfolio as 8-12% isn't that difficult over the long run.

There is an add by Ally just above your article saying they are paying 2.0% on TFSA. Where did you find an account that will pay 5.0%???

The advice must be coming from a Personal Financial Advisor - totally unrealistic and misleading. 5% return and invest for 50 years. Be real.

The advice must be coming from a Personal Financial Advisor - totally unrealistic and misleading. 5% return and invest for 50 years. Be real.

You can move your tfsa money over to a tax free mutual fund and depending on the markets you can get 5% or more on your $5000 contribution. My initial contribution of $5000 last year is up to $5700 a year later

Correct, people. No bank offers that rate of 5%. The bank is not your friend. Get your money out of a bank and into some financial fund that goes to the markets for proper investments instead of some bank account. The bank makes money from your money, you don't.

I have not heard of any financial facility offering 5% on a TFSA. I think you are misleading the general public. The usual interest paid on accounts is more like 2%. Your calculations are also based over 50 years, by that time l will be pusing up the daisies. Even if l was starting out at the eligable age of 18, l most likely would not have $5,000.00 a year to save.

Which Bank paid for this Fairy Tale? 5 Percent...what a dope-smoking article this was!

If you believe that the GOC will let you accumulate a whole bunch of money in any account while they get reduced tax dollars . . . I don't believe it . . . they can change the rules anytime they please and they will. TFSA sounds good but if it works out good for taxpayers, Revenue Canada will get you one way or another.

Who is this person trying to impress? and or, working for?
My first year of the $5000 at the credit union, produced !$150 interest. Please ask him or her, to do a little more honest research before any more writings

Thank you and keep smiling eh!

Ehh! If the percentage of the population right now is in the mid 50 (baby boomers) then we dont have 50 years to wait let alone have $5000 per annum to save....

Achieva financial has 3.6 %

Gotsta luv these experts who enjoy running numbers by folk at a high rate of speed. Slow down lady - I don't have 50 years of life left, of that I am quite sure. Perhaps your 5% interest rate goes back to the days when inflation was 20%, right? Point me to someone who saved money for 25 years and didn't touch it - I'll show you 50 people who had to touch that account. Stop spinning the numbers game on us already. I agree getting rich doesn't happen by accident, but listen to your numbers con game won't help one bit. Smoke on that!

Your advice may be sexy and delicious and fun but you are totally unrealistic and your advice is ultimately dangerous. If you are going to suggest anyone can find a rate of 5.5% annually you should also point out the risks associated with such a rate - no savings account is guaranteeing anything remotely close to that these days. Why do you want to encourage people to have unrealistic expectations?? Stop already. Encouragement from people like you is the reason the system is in such a shambles.

What institution offers 5% on a GIC or regular savings for a TFSA? Don't you have to invest in the stock market for that rate? If so, you can lose a large portion of your $5000. Most of us experienced that! As a senior, time is not long enough to regain the loss! You could just as easily lose 25%, since at that rate you are in a high risk category. Maybe the TFSA is only for younger people who have years to invest in these kind of stocks and loads of time to regain their losses!

If you are a member of a pension program (teachers, OMERs, etc) and have put in for the full number of years, etc. any RRSP income when post-retirement will usually mean OAS clawbacks. TFSA income is not counted as income so you are not taxed on it when you use it. A good benefit over RRSP's should anyone be in this situation.

The TSFA makes our Government look like they are doing us all a huge favour. What happened to the $2,000 interest annually that we used to get tax free from our bank accounts...it's gone! Bottom-line we are the most taxed people on Earth and in Ontario we will have a new HST tax (which taxes everything). Canadians in general like to complain when we are in our small social groups but never have we been organized to complain about our ever increasing taxes. I have been working for 30 years (and my life style although good), I know my quality of life was much much better in the 70 and 80s...we had more buying power. Our Gov't (all levels) have spent us all into higher taxes and we will never pay off our Govt debt. We should feel sorry for the next generation that will be inheriting our debts as a result of bad Government.

50 years , what a joke, one has to start at 20 years old ( at that age they don't have the money to invest ) and wait till your 70 years old to get the benefits. 30 years will be realistic.

what a joke.

Many people hear information on the TFSA from friends and are interested however not all information being shared is correct. I have the "official" rules and regulations behind what you can and cannot do. I would suggest looking beynd the banks for 2-3% returns. The private sector offers many great secure alternatives in land and oil and gas where 5-10 % or higher is a realistic return. Do your homework and look outside the box. I work outside the box and offer information and local presentations on TFSA vs RRSP. to find out more I am availabe at keithj@foundationcapital.ca at your convenience.

know your stuff and do your homework and yes GET RICH!!!

Hi,

Which bank or any other financial institurion pays 5%?
Love to know, i'm ready to inviest right now!!

As anyone is aware interest is the worst form of income you can have mainly due to our tax regime and the masssive political infrastructure it has to support.
Taking full advantage of the TFSA means ensuring that you have a portfolio of investments within the account umbrella containing those instruments with the greatest growth potential and a risk level that suits your tolerance.
Interest income has been most favorable to the banks and elast favorable to the consumer but at least the TFSA helps us to keep more of OUR money.

There seems to be some confusion between the TFSA and the investments within it. The TFSA is a an account as are RRSP's, RESP's etc. You can hold diffenent investment products within the TFSA depending on your risk tolerence, investment timeslines etc. Recommend that you sit down with a financial planner with a recognised FI to get the facts and help determine which investments are most suitable for you to hold in your TFSA.

You can't just count on the interest you get paid from the TFSA account.
Take your money and invest it in higher paying interest places such as Stocks, Bonds etc....
TFSA account interest will not pay you more than 3% most likely. No one offers a higher rate than that as far as i know.
When you invest it in different things you sure can make a whole lot of money..

My first year return on my $5000 TFSA is between 120 - 140% I am fortunate enough to pick the right stock. For sure, this year will not have this kind of return. I am still target for 15-20%.

In response to Polly:
"You use 5-5.5% rate of return in your examples. Which institution offers anything resembling that high a rate? Nobody! That's the myth of a TFSA."

Obviously no bank offers that kind of a return. if you are saving for the long term (20-30+ years) as shown in the examples, you would be an idiot to only save money in banks. These returns are easily achievable by investing in the market. The rates that are shown (5-5.5) are your average rate of return over that many years, which is pretty modest actually. SO YOU ARE WRONG, IT IS NOT A MYTH! YOU ARE JUST FINANCIALLY UNEDUCATED!!

I have a TFSA at RBC Action Direct, purchased Bank of Nova Scotia stock and reinvested the dividends (DRIP) at years end it was worth $8000, a 60% rate of return. I don't expect this every year but anticipate double digit returns. The TFSA is for our grand daughter when she turns 21.

Being rich is only true till the next ponsi, Madden, or Earl Jones takes it all away thru slick advicing. Even some top investment advisers rarely follow their own advice on RRSP saving due to affecting present lifestyle.
Common sense reason is in the future who would all those nice oldfolk spend all their money on? Wiffs of microsand instead of a anybody willing to work for old people? There are limits to economic balance as pre bond bankruptcy New Zealand and the Falklands even today prove all to true.
Iceland is a classic example of investment meltdown done by brilliant financial advice. There nothing wrong with panicking if the wrong people get punished for causing it in the first place.

The TFSA is great since money taken out is tax free.

If you are 45 years old Desjardins has a guarantee of 7% every for ten years more if the market goes higher. Income can be pulled out tax free, depending on ones age this income can be taken out for as long as the person lives. This may not be everyone's cup of tea but may make sense for some.

Regarding Polly's question, ING is now offering their TFSA at an ongoing rate of 3%.

Regarding Polly's question, ING is now offering their TFSA at an ongoing rate of 3%.

This year my rate of return has been + 25%. You have to take risk to earn a better rate of return..buy stocks with known history.

I find the TFSA best for a stock account, you know that you can have mutual funds, stocks, bonds ect in it right? Risk = Reward.

I have a TSFA account with BMO and it pays 1% interest only!
Can you do some research and see which financial companies offer more than that?

You use 5-5.5% rate of return in your examples. Which institution offers anything resembling that high a rate? Nobody! That's the myth of a TFSA.