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ADVICEUpdated September 21, 2025

4 good reasons to contribute to your TFSA

4 good reasons to contribute to your TFSA

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Saving for medium-term projects, building a safety cushion, supplementing your retirement savings, starting to save as early as age 18, continuing to save even after age 71. There's always a good reason to open and contribute to a Tax-Free Savings Account (TFSA). Introduced in 2009, the TFSA is an interesting and flexible savings tool, because it allows you to accumulate and withdraw money without having to pay tax on the returns. Wondering if the TFSA is right for you? Here are four good reasons to believe in it:



1. Tax-sheltered savings for home renovations, a trip or to deal with the unexpected


The TFSA is a good option if you have medium-term projects or need an emergency fund. Depending on whether the type of TFSA investment you choose allows it, you can make withdrawals at any time, and these will be added to your contribution room at the beginning of the following year. If you have enough TFSA contribution room, you can reinvest the amounts withdrawn in the same year.


In addition, when you put money into a TFSA, not only does it grow tax-free for the duration of the investment, but you won't have to pay any taxes when you withdraw it. However, unlike RRSP contributions, TFSA contributions are not tax deductible.



2. Top up your retirement savings while paying less tax


If you have reached your RRSP contribution limit, you can save more by putting money in your TFSA. When you retire, you can withdraw amounts from your TFSA, and these withdrawals won’t be considered taxable income. This will allow you to increase your income for retirement without having to pay more taxes.


If you pay little tax, you can also save in your TFSA and transfer these contributions to your RRSP in the year when your income will be in a higher tax bracket to maximize your tax returns.



3. Use your contribution room from previous years


You've never contributed to a TFSA and are wondering how to make up for lost time? The good news is that it's never too late to contribute to a TFSA. If you’re a Canadian resident aged 18 or older and have never contributed to a TFSA, you could have a sizeable contribution room.


However, remember that for any given year, your contributions must not exceed the contribution limit applicable to that year, otherwise you’ll have to pay tax on the excess contributions. If you contribute more than your limit to your TFSA, the Government of Canada imposes penalties of 1% of any excess calculated each month.3 To confirm your contribution room, contact the Canada Revenue Agency (CRA).



4. Continue to save even after age 71


Unlike an RRSP, which must be closed or converted to a RRIF by December 31 of the year in which you turn 71, you can maintain a TFSA even after age 71 and keep contributing money within the contribution limit.


Wondering if the TFSA is right for you? Or if it would be a good investment vehicle to complement your savings strategy this year? Feel free to talk about it with your advisor, who will help you choose the right investments so that your TFSA is an optimal solution that meets your needs.



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