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Archive for the ‘Advice’ Category

Most Canadians Adopting TFSA for Rainy Day

July 1st, 2009

The HSBC Savers Survey found that 84 per cent of Canadians have some savings put aside.

This percentage is up dramatically compared to a 2006 HSBC survey, which found that only 67 per cent of Canadians had funds put away for the future or an emergency. The percentage of Canadians that indicated they have savings varied somewhat across the country:

– Albertans have the highest savings rate with 92 per cent indicating they have some savings
– Atlantic Canada has the lowest rate of savers at 77 per cent
– The percentage of Quebec savers was 80 per cent
– The savings rate for BC residents is 84 per cent, in line with the national average
– 89 per cent of Manitoba and Saskatchewan residents claimed to have savings
– 86 per cent of Ontario residents had some savings put away

The survey found that 88 per cent of Canadians are already aware of the TFSA, with 68 per cent of them saying they plan on opening an account. Of those planning to open a TFSA, 70 per cent say they would use it for general savings and retirement planning while 23 per cent see it as a good vehicle for emergency funds.

Younger people (defined as those aged 18-34) who plan to open a TFSA intend to use the account for general savings, emergencies or education. This is in contrast to older Canadians aged 34-54 who, according to the survey, are more likely to see their TFSA as part of their retirement savings.

34 per cent of those who plan to open a TFSA intend to open a high-interest savings account. This is especially true for younger respondents (aged 18-34) and for residents in Ontario. 15 per cent will be using their TFSA for Guaranteed Investment Certificates (GICs) or term deposits. 16 per cent anticipate using the TFSA for mutual funds or stocks and bonds, and 36 per cent intend to use a combination of all these investments and savings instruments.

The current economy also seems to be having an effect on TFSA awareness. 20 per cent of respondents indicated that economic conditions have in fact increased the likelihood that they will open a TFSA in the near future. The HSBC Savers Survey of 1,000 Canadians was conducted in February 2009 by the national market research data collection firm Opinion Search.

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TFSA News and Stats At-A-Glance

June 27th, 2009

ING Leaps Out of the TFSA Gate Strong

ING Direct says about 170,000 customers have signed up since early October.

Royal Bank is Happy with Numbers

At RBC Direct Investing in Toronto, for example, Donna Nelson, vice-president of strategy, says more than 2% of her company’s clients opened TFSAs in the first two weeks of January — an impressive number considering RBC Direct Investing is one of Canada’s leading online brokerages.

RBC’s annual RRSP poll, conducted by Ipsos Reid, showed only eight per cent of Canadians who plan to open aTFSA intend to reduce their RRSP contributions.Some 36 per cent of those aware of theTFSA say they will maximize contributions to both accounts, while 23 per cent plan on moving money from non-registered accounts into aTFSA instead.

The general thought is to invest insideTFSAs for shorter-term things like a vehicle or special vacation, while putting funds into RRSPs for long-term retirement. Yet the RBC survey indicated 44 per cent of Canadians who intend to op en a TFSA want to use it for retirement, including 53 per cent of Canadians aged 18 to 34,and 57 per cent of those between 35 and 54.

Scotia Bank is Happy About TFSA

Scotiabank’s launch of the new Tax Free Savings Account exceeded expectations. More than 157,000 new accounts were opened in the first month, with more than half of these accounts having an average balance of close to $4,300. The supporting $5,000-a-day giveaway contest generated more than 107,000 entries.

CIBC Predicts Multi-Billions of Dollar Savings

CIBC World Markets report – the investment house predicts Canadians will squirrel away US$20-billion in the coming year and US$115-billion in the next five years.BMO says TFSA Popular with 65+

According to a survey from BMO the new Tax-Free Savings Account is most popular with Canadians 65 and older. One-third of people 65 and older have opened a TFSA and one-quarter of those 55 to 64 have an account. Fifteen per cent under the age of 45 have a TFSA. Forty per cent of Canadians say their retirement is their savings goal for their TFSA.

20% Interest Amongst Canadians

For a country as highly taxed as Canada amazingly only 1 in 5 Canadian adults has yet to claim their latest and possibly greatest tax break, the Tax-Free Savings Account (TFSA).

According to a Leger Marketing survey 78% of 1,541 Canadians polled had not opened up a TFSA as of mid-March 2009. Of the majority that does not yet have a TFSA account, 44% cite lack of money for not taking advantage of the accounts.

Those earning less than $40,000 a year are even less likely to take advantage of this tax break: 60% of this group blamed lack of funds; 57% of widows and divorcees also cite lack of money as their reason for not opening up a TFSA. TaxFreeSavingsAccountInfo argues that you can’t afford NOT to open up a TFSA.

According to Wilmot George, director of tax and estate planning for Mackenzie Financial Corp., 47% of Canadians consider the tax-free savings of TFSAs to be their most appealing feature, a percentage that hits 62% for those who already have one.

However, 20% of TFSA holders aren’t sure how they will use them and 19% expect to use them only for emergencies.

More than half (51%) are using them for short-term savings, held in cash, money market mutual funds or short-term GICs. But 36% plan to use them for long-term goals such as retirement or education. Cash and cash equivalents are not the most suitable way to invest for the long term, George says.

The Leger Marketing online poll was conducted from February 5 to 9, 2009 and is based on a sample of 1,502 Canadians aged 18 and older. The margin of error for a sample of this size is +/- 2.5%, 19 times out of 20.

Average Dollars Invested

The results of a survey conducted by teleVox, Harris/Decima are based 1,012 interviews between March 5 and 8. The margin of error of 3.1%, 19 times out of 20.

17% of Canadians invested in new tax-free savings accounts (TFSA), contributing about $3,471 each of the maximum eligible amount of $5,000, the survey found.The survey also found that 16% of Canadians decided to “park” their RRSP contributions in 2008 “by investing in short-term and typically low-risk vehicles, such as bonds and money market funds,” Investors Group said. That’s up from 14% the previous year.

“Of those who park funds, 36% say they will park their investment for one year or less, 39% for more than one year,”it said.

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Choosing the Best TFSA

June 22nd, 2009

Now that you are convinced that it is a good idea to open a tax free savings account the next logical questions that come to mind are “Where do I open the TFSA?  How do I choose from the options available in the market?”

It is not an overstatement to suggest that there are indeed many choices available to Canadian citizens.  Banks, financial institutions, and brokerage firms are vying to get the biggest share of the savings account market and are offering many incentives to consumers.

Click here to find out what some of the leading banks in Canada are offering.

What everyone already knows is that a Tax free savings account allows the account holder to contribute $5000 per annum.  They can make tax free withdrawals and earn a tax free income on this account.  What everyone does not know is the fine print regarding cost of opening and maintaining such accounts and the accruing benefits.  There are a few points which should be considered before choosing a bank.

·      Beware of Bank Fees

There is no charge whatsoever for opening a TFSA account.  Each bank charges an administration fee and a withdrawal fee.  Find out what are the bank charges and the fee structure in the banks of your choice.  Some banks and brokerage firms are allowing a flexible fee structure for their existing clients.  For example BMO InvestorLine is expected to charge an annual fee of $50 and a withdrawal fee of $25.  An exception will be made for investors who have $100K or more already invested in InvestorLine assets.  Many brokerage firms are expected to offer competitive fee structures.

·        The Market Favours ‘Savers’

Choose a bank which is convenient for you.  Try to open a TFSA account with your current bank to avoid maintaining too many bank accounts and the related paperwork.  For example ING Direct is running a special for TFSA account holders.  According to the information posted on the website funds deposited in a promotional Tax-Free Investment Savings Account opened between October 4 and December 31 will be transferred to a new Tax-Free Savings Account starting January 1, 2009.  The bank has recently announced that the consumer can hold cash or GICs in your TFSA account and is also offering Mutual Funds in TFSAs.

·        Long-Term Financial Vision

Every savings option will have some pluses and some minuses for you.  Before choosing your bank think about why you want to save: do you want to save for your child’s education, for your retirement, or for emergency purposes?  Are you planning to buy a home? How much do you expect to save and gain in the long term?  A TFSA could be a better option than the Home Buyer’s Plan (HBP) for first time home buyers.  A TFSA may not be a good option if you are already saving in the Registered Education Savings Plan (RESP) for your child’s education.  A TFSA is definitely a great option for saving for future contingencies.

Choosing the best tax free savings account bank can be a challenging task but if you know your financial goals clearly and have adequate information about the fee structure it is as easy as a pie!  Happy Thanksgiving!  Give yourself the gift of a TFSA account for a secure future.

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