Beneficial goal offered by feds

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Many Canadians will be amused over the debut Jan. 1 of the tax-free savings account. For those with plenty of surplus to set aside, the ability to invest $5,000 a year in an account and allow the holdings to grow tax-free is great.
Plenty, on the other hand, will find it difficult to scrape together enough to make the new TFSA worthwhile. Still, having the added reward for individuals is good, and thus it's a valuable initiative from the federal government.
The plan offers Canadians aged 18 or older an account where they can invest up to $5,000 each year. Eligible investments include guaranteed investment certificates, bonds, mutual funds and stocks.
It doesn't offer the immediate tax shelter such as that provided by registered retirement savings plans. But investment gains won't be taxed, withdrawals aren't taxed and there's no requirement for making withdrawals by a certain age, as with RRSPs.
There is some debate about the effect such a plan will have at this point.
Given the overall uncertainty of the economy, some argue this is a time when you hope to see people spending. It's bad timing, in other words.
That's a tough one. But when the government announced the new accounts, in last February's budget, things were booming and few would have expected anything approaching a recession by the end of the year.
Oddly, a recent survey by The Canadian Press-Harris Decima showed most Canadians - 58 per cent - are optimistic about the coming year.
In fact, when it comes to money saving, gloomy forecasts in themselves put people on that bandwagon: save for a rainy day rather than spend.
The concept might take a while to catch on with most. But in the long run, the tax-free savings will benefit people. Considering the high debt ratios within households that have been reported in recent years - and which helped bring about the current crunch - this is a healthy alternative.

Organizations: Canadian Press, Harris Decima

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