Tax-Free Saving Account in ING DIRECT

A while back, the government of Canada suddenly realized that Canadians did not save their money as much as they hoped. So, to goad Canadians into saving, they introduced the Tax-Free Saving Account (TFSA) that basically allows up to $5,000 per year contribution to grow tax-free.

How the TFSA Works

• Starting in 2009, Canadians aged 18 and older can save up to $5,000 every year in a TFSA.
• Contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn.
• Unused TFSA contribution room can be carried forward to future years.
• You can withdraw funds from the TFSA at any time for any purpose.
• The amount withdrawn can be put back in the TFSA at a later date without reducing your contribution room.
• Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
• Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death.

This program will take into effect starting 1 January 2009. But ING DIRECT offers them now!

If you open a TFSA account with ING DIRECT now, you can contribute up to $5,000 (for this year), and at the end of the year, they will double your interest to cover for the tax. Your $5,000 will get tax-free interest (at 3% annual as of now) starting this year.

If you are thinking about opening a new ING DIRECT account, I would encourage you to use this Orange (referral) Key: 17472847S1. This way, if you deposit $100 or more for your initial deposit, you will get an instant $13 bonus. Quite a good deal, right?

PS: If you haven't heard of ING DIRECT before, these are the very basic introduction to them. They are by no means complete, so please do additional research before you commit anything.

• This is an online bank (i.e., no ATM, no branches, no offices).
• There is no fee and no service charge for any accounts.
• They have decent customer service (according to my friend, a long-time ING customer)
  
• You need to have another bank's chequing account before opening an ING DIRECT account. When you make your first deposit using your existing account's cheque, ING will link your ING account with your chequing account.