A few weeks back, we were kind of stunned when we discovered someone in the family (Ray not to name her) had a lot of money in a savings account but did not register it as a Tax-Free Savings Account (TFSA). Interests gained in that account resulted in a juicy tax bill for her. Unnecessary because she still had plenty of TFSA contribution room available.
The money was not put in a TFSA because it was primarily used for emergencies and to pay for imminent renovations and Ray thought funds in a TFSA were not easily accessible. We checked with other members of the family and again, to our surprise, a lot of them believed TFSA money was not liquid at all. For many, TFSAs and RRSPs are all the same…money stashed there won’t be accessible till…far away retirement. So, many folks have the impression that TFSA money is tied up in some way that would prevent immediate access to their funds. But in fact, this is not true.
It’s sad because despite our financial knowledge and a lot of effort, money remains a taboo subject for many in the family. It seems like the more you are successful with money, the more people get shy and the less they are willing to talk about it. We try to remain humble about all of it, but it appears our glow still scares quite a few. These poor folks (no pun intended) prefer to keep things as anonymous as possible and give their trust to alleged advisors.
So, another one greatly handled by so-called expert advisors. In this case, with no commission in play, the «expert» simply did not bother.
The Frozen TFSA Asset Misconception
Somehow, many people think TFSA funds are frozen and not easily accessible. And, despite the fact we love Disney, we are not talking about Frozen starring Anna & Elsa. And in reality, your TFSA might be more like Olaf, the chill snowman that loves and dreams about summer.