0.8% TFSA or 4% taxed?

[layla65]

im new to Canada and the taxing is confusing.

I store away about 2000 a month into a TFSA account right which pays 0.8percent interest.

I also have the Wealthsimple cash account which pays out 4 percent but taxed.

Assuming iam consistent with the 2k saving for 12 month.. which is better?

 

[heathermj]

@layla65 Make sure you arent over contributing to your TFSA. $2,000/month is a lot for a newcomer.

 

[layla65]

@heathermj ive never contributed for the 2 years ive been here. I am checking. thanks for advice tho

 

[lightofredemption]

@layla65 Why would you have a TFSA that pays such terrible interest? You should change that ASSP

 

[layla65]

@lightofredemption i just opened one from the main bank i use.
which is Tangerine

 

[lightofredemption]

@layla65 TFSA is simply a vessel that you can put investments in. You could buy crypto or tesla stocks or ETFs or GICs. Get something better in that TFSA or open one elsewhere!

 

[healingfromgod]

@layla65 You are charged your marginal income tax rate on the interest earned. Depending on your total income, this case vary widely, but 30% is a good estimate for many people.

$2K at 4% yields $80 for the year; if we assume a 30% marginal rate, you would pay $24 in tax and keep the other $56.

$2K at 0.8% yields $16.

 

[layla65]

@healingfromgod thanks for thr math and explanation!
i guess taxed is better.
im 30percent taxed for sure

 

[restres]

@layla65 Dude, EQ Bank's TFSA is 3% and their TSFA GIC's have been around 5% for a little while. A lot of other institutions are equally as competitive or more competitive than that.

A 0.8% return would be so negligible, for me at least, that I wouldn't even worry about sheltering it from the taxman.

 

[layla65]

@restres Noted for EQ. gotta check it out

 

[restres]

@layla65 ....probably a whole lot of other places too!

 

[ktandbt]

@layla65 A TSFA is simply an account type, you can buy whatever you want inside it like ETFs and/or stocks.

Don’t let it sit doing nothing. Invest the money in something and actually take advantage of the tax free growth. Right now you’ve effectively just stuffed it under a mattress

 

[layla65]

@ktandbt i gotta research how to invest through the TFSA. right now all i see on WS is making sepreate investment accounts which I assume is a taxed account

 

[ktandbt]

@layla65 Is your TSFA with WealthSimple? You should just be able to click on the account and then inside of it there will be options to add funds or trade.

Click trade and search for the investment you want