The TFSA is somewhere you can put money and it will grow tax free. What does that mean? Well, when you get interest from the bank it is taxed. If you make some money in the stock market, its taxed. Collect dividends? They’re taxed too! The TFSA is a shelter where you can collect all these types of profit tax-free.

You get $5000 per year of new money that you can put in. If you don’t put the full amount in it will carry forward to future years. Now, what most people don’t realize is that you can grow your contribution room as your investment grows. Here is an example:

You put $5000 into a TFSA and invest that money in a company that specializes in high-end massages for pet monkeys. Other people didn’t have the foresight you had into the pet monkey luxury service market, so when you bought the shares they were just pennies each. Surprisingly enough to everyone but you, pet monkey massages take off and everyone from Shaq to Paris Hilton is getting their pet monkey a massage. Suddenly your shares are worth several dollars each!

The $5000 you originally put in is now worth $100 000. Way to go! Now, you want to celebrate by rewarding yourself with a shiny new sports car. But what happens to your contribution room if you take that money out? Does it drop back down?

Thankfully, it does not! You can go buy your $100 000 sports car with that cash and your contribution room will be $105 000 the next year ($100 000 plus the $5000 for the new year).

It is this fact that makes me argue heavily in favor of using your TFSA for investment purposes. If you have more than your contribution limit invested currently as many of our parents would then I would recommend they move over their most speculative or high-risk investments to their TSFA. It is that type of investment that is most likely to double or triple in value. This saves you more money on capital gains and also increases your contribution room for the future when you want to shift to purely safe investments which will again save you more money as you collect dividends, etc.

So if you ask me, use your savings account to save. Use your TFSA to invest, and if you have a large diversified portfolio then put the high-risk shares in your TFSA.

When you’re a billionaire feel free to share some of the wealth. Or buy the Phoenix Coyotes and move them to Hamilton. I’m cool with that too.

This post is from Ryan Price’s blog.

How to Best Utilize your TFSA

I dislike brokers and investment companies who use the media and slick marketing material to attempt to convince us that we are not smart enough to invest on our own – that we don’t have the brains or the intense background that they do to make wise financial decisions. It becomes pretty clear once you educate yourself through investing books and other research that most “investment specialists” at the banks or your local Edward Jones office did nothing more than take a few day course to become “specialists”. They are salespeople and their jobs are to convince you that you don’t have the ability to take care of your own finances. That is crap and it is something I beleive most people can do themselves. I do beleive that for some people who do not want to do the research themselves that brokers and investment specialists are an important tool, but the best way to use them is to learn as much about the topic yourself to ensure you are not just being sold to.

I also don’t like media sensationalism and I especially don’t like the way mutual fund companies hose investors with high fees, even when they cannot even meet the performance of a stock market index. It would be one thing if they could beat the market, but most don’t and that is unacceptable.

This post is from Ryan Price’s blog.

Investing Pet Peeves

Your home (or eventual home), is an asset right? I thought so. Rich Dad, Poor Dad looks at it differently more intelligently. It teaches how to have your money work for you.

So, read the book and find out if you really know the difference between an asset and a liability.

This post is from Ryan Price’s blog.

Do you know what an asset is?