The Misunderstood TFSA

Wed, 2016-05-11

Given that it is one of the newer vehicles available to investors it probably shouldn't be surprizing that it is one of the most misunderstood. 

To understand why the confusion exists one must go back to overzealous banks, their promotion of a vehicle aimed at the masses and some understanding of how this impacts their retention of assets.  It's debateable whether this (to date) has benefitted individuals or the institutions more.

TFSA or RRSP?  Eventually, both.   At the risk of a generalization RRSPs benefit working folk with higher incomes while the TFSA is of most benefit to those who may have larger blocks of money exposed to full taxation.

I've heard many a TV talking head extoll the virtues of the TFSA citing the same textbook example of the highest income earning Ontarian in the highest marginal tax bracket invested in a bond or GIC.  The example didn't seem to take into account interest rates a bump above zero nor the varied needs of the individual.

While I do believe that the average person should have a high interest savings account as an emergency fund it needn't necessarily be in a TFSA.  Unless the amount is sizable the inconveniences, paperwork and related accounting costs negate any tax savings.

In my own practice I have recommended a variety of approaches which may include growth objectives for estate planning to husband and wife teams with two very different objectives based upon collective needs.  There is no one size fits all.

A good starting point for most is how does this fit into the overall scheme of things and what are the likely the tax savings?

As the contribution room has grown to $46,500 the potential savings is also increasing so take time to review your needs.


Murray Callaghan is a Certified Financial Planner with 15 years' industry experience.  He partners with external portfolio managers and insurance providers.   He can be reached at 250 286 9968 or visit his website at