Since everyone is likely busy finding money to fill their RRSP’s (the deadline is March 1, 2010 to claim for the 2009 tax year by the way), people probably aren’t focusing on the TFSA’s right now. If you are a 20something and are in school and aren’t making that much money (aka you’re not getting taxed to the nines), you should think about contributing to a TFSA instead.

The TFSA’s were introduced in the since January 1, 2009 and is basically the greatest thing since sliced bread (or RRSP’s which were introduced almost half a century ago- before we were even born, shucks!)

Like RRSP’s, TFSA’s are not an investment per se, think of it like a glass jar.  It’s a container where you put your investments.  Anything that you EARN from putting stuff in this container is withdrawn tax free.

The TFSA is basically the inverse of the RRSP (DANG, Jim Flaherty- you’re not just a pretty face after all!)

• In the TFSA you invest with your after-tax hard-earned bloodsweat money, and money that is withdrawn from it is NOT taxed.
• In the RRSP, you invest with pre-tax dollars (yes, the tax refund is supposed to reflect this) and money that is withdrawn is taxed– the caveat is that most people who retire are at a lower tax bracket so they will pay less tax on the money withdrawn.

You can hold many things in the TFSA (except USD holdings- only Questrade TFTA’s allow this) and it’s the same for an RRSP.

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Now we want to think OUTSIDE the box (aka RRSP).

What should we keep outside of the RRSP or Tax Deferred Shelter?

Well, after you maximize your RRSP’s and TFSA, then you can keep investments in the “spillage”

Basically you want investments that are the least “taxing” to you, to keep outside of an RRSP.

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No, I don’t mean Creme de la Mer (the uber expensive face cream), I mean MER, otherwise known as Management Expense Ratio.

From my experience, your investment advisor won’t really tell you about this until you ask for it, or look into it yourself.

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