There’s a lot of talk about the Hamilton housing market.
A May 2018 study from Ryerson University’s Centre for Urban Research and Land Development was examined if millennials in Hamilton were A Generation Stuck in Apartments. Jeffrey Martin, lead author of the report, called “The Generation Effect surveyed 1,200 working millennials in Hamilton and found that financial security is affected because of precarious employment.
But is a future in Hamilton doom and gloom for millennials? Can people afford to buy houses? Is rent too high? What’s happening with affordable housing?
While these questions are valid and necessary, there doesn’t seem to be much public discourse on the ways Hamiltonians can save and invest to afford a house.
Many people remain perplexed on the differences between the RRSP and the TFSA. It’s obvious that the lack of personal finance education is creating confusion and that’s a disservice to personal growth and city advancement. A piece of the puzzle is to increase financial literacy.
Today, we share a tax-free savings account (TFSA) cheat sheet with 3 things you need to know about this account for 2019. This is for anyone who wants to do more of what they love, but doesn’t know where to start. The cheat sheet will help you understand the different choices you have to grow and store your money.
The limit is increasing!
One exciting thing that happened in 2019 is that the TFSA contribution limit went up from $5,500 to $6,000. If you’ve never put money into your TFSA and you are old enough to have one since it started in 2009, you can put in $63,500 in 2019!
Don’t have $63,500 laying around? Don’t worry, there is no minimum limit on how much money you put in your TFSA to start. Start with what you have.
Don’t know what the point of a TFSA is? Here’s the rundown.
A tax-free savings account (TFSA) lets you save and invest money without paying any tax on the growth within the account. You also don’t pay taxes on the money you take out of your TFSA if you need it.
Essentially, a TFSA lets you store your money tax-free. If you invest that money within the account, you don’t pay taxes on it.
The TFSA is not a savings account.
The TFSA is, first and foremost, an investment account. It’s confusing because the name literally has the word savings in it but a TFSA is simply a ‘basket’ where someone can hold investments. In your TFSA “basket” you can buy stocks, bonds, ETFs, Mutual funds and other assets. To figure out what to buy, you can work with a financial planner or advisor.
To find a certified financial planner, search the Financial Planning Standards Council directory.
If you prefer to handle your own investments, consider a robo-advisor or discount brokerage.
Robo-advisors are an online platform that customize portfolios to your needs. They’re a way to save fees and invest using a hands-off approach.
The TFSA is flexible.
We’re told from a young age that saving for retirement is important. It makes sense that many people think that the Registered Retirement Savings Plan (RRSP) is the best place for this goal. However, the TFSA is way more flexible because you can withdraw funds when you need them without incurring any penalties or having to pay taxes. At the same time, funds can be left untouched and used for retirement. In the end, the TFSA is a great place to invest or store your money for short- and medium-term savings goals, including an emergency fund, a wedding, or a trip. The best part is you don’t have to choose between a TFSA and an RRSP. All eligible Canadians can use both. It’s a matter of personal situations and goals to determine the best plan but keep in mind that the TFSA is the more flexible option of the two.
Having your finances optimized and streamlined will help you reach your goals faster. Whether you’re planning for retirement, or looking to get a piece of Hamilton’s real estate pie, it’s important to have your finances in order. Hamilton is a wonderful place to live and work. With the proper tools, services, and supports to help people be more financially secure, the potentials for this city are endless.