It’s that time of year – and as we settle into new routines, new budgets and a new year, it’s also a chance to start things off right. But where do you start?
For people arriving in a new country, establishing personal and financial routines help. Many newcomers indicate that they make it a top priority to purchase an investment product shortly after arriving in Canada. In fact, a RBC poll revealed that of newcomers living in Canada five years or less, 71 per cent of them own an investment product, with a tax-free savings account (TFSA) being the most popular option at 40 per cent.
“Opening up a TFSA is a good option for new Canadians who wish to invest shortly after moving to Canada. It is designed to help you save and invest money and the return you earn is tax free. You can withdraw funds whenever you need, making it a flexible way to save for your future goals,” explains Ivy Chiu, Senior Director, Multicultural Markets at RBC. “Additionally, you don’t need to have earned an income to be able to contribute to a TFSA. So newcomers can open up a TFSA and start saving right away.”
Here’s what to know about TFSAs:
Eligibility: As a newcomer, you benefit from the fact that you don’t need earned income to accumulate contribution room. All Canadian tax residents who are at least 18 years of age have the same contribution room of $5,500 for 2017. You must be the age of majority in your province of residence and have a Social Insurance Number to open an account.
Contributions: You don’t need to have the full $5,500 to get started. Unused contribution room accumulates and can be carried over from year to year. If you withdraw from your TFSA, the full amount of your withdrawals can be put back in future years. Just be careful, as re-contributing in the same calendar year can result in an over-contribution that is subject to penalty tax.
Tax Benefits: Income earned and TFSA withdrawals are not included as income for tax purposes. This means the TFSA offers a high degree of flexibility and will help to minimize your income tax. The money you deposit to your TFSA can help you achieve your short, medium or long term goals.
A TFSA is a great way to help save for your future. Talking to an RBC financial advisor can help you understand the benefits of a TFSA and the investment solutions that best fit your goals. Learn more about banking in Canada at rbc.com/newcomers.