Parents and grandparents who opt for a non-traditional graduation gift should consider contributing to a new grad’s Tax-Free Savings Account (TFSA), says BMO Bank of Montreal.
“Teaching young adults how to invest for the future is one of the most valuable gifts you can give,” says Larry Moser, regional sales manager, BMO Bank of Montreal. “A TFSA is also a great way for young investors to start learning about how taxes can affect investment income.”
Introduced in 2009 by the federal government, TFSAs allow investors to save and invest up to $5,000 per year without paying tax on any interest earned or withdrawals.
Furthermore, Moser adds that TFSAs are an effective way to save for both short- and long-term goals, especially since the investor is not penalized for withdrawing savings from the account.
According to a BMO study, conducted by Leger Marketing, 64% of Canadians are knowledgeable about TFSAs, while 44 per cent currently have a TFSA. The average annual TFSA contribution is $3,700.