Bank of Nova Scotia is the first major bank to offer Canadians the opportunity to pre-register for a Tax Free Savings Account, allowing them to beat the rush on Jan. 2, 2009.

“The TFSA gives Canadians another way to save and round out their financial portfolio,” said Barb Mason, executive vice president of wealth management at Scotiabank. “We know that this investment tool is going to be a popular choice for Canadians next year, so we wanted to give them the option to open their account now and be ready to start using it come the beginning of 2009.”

Starting Jan. 2, 2009, Canadians will be able to save $5,000 in a TFSA each year. All investment income earned inside the TFSA (capital gains, interest, dividends) are tax free for life. Unused contribution room is carried forward indefinitely and amounts withdrawn top up future contribution room. The account can be opened at age 18 and be kept for a lifetime. The TFSA will offer the flexibility of a short-term savings vehicle with a longer-term
investment plan, all in one.

“The TFSA will give Canadians an opportunity to save money and have it grow tax-sheltered like an RRSP with the flexibility of a savings account,” said Gillian Riley, managing director and head of retail deposits with Scotiabank. “This account will be a great tool, not to replace other traditional investments but to enhance the earning power of their portfolio.”

Riley has some simple strategies for Canadians in the prime of their saving years and looking to incorporate the TFSA into their investment portfolio:

– Use the TFSA as a rainy day fund; it is just as important to save for what you know is going to happen in the future as it is to save for what you can’t foresee. Canadians can take advantage of the flexibility of the TFSA and have their rainy day funds grow tax- sheltered with the comfort of knowing that they are easily accessible.

– Put extra savings in a TFSA. Canadians are often most serious about saving for retirement in the last five to 10 years of working. If you have maximized your annual RRSP contribution and are getting a large tax refund, consider putting that money into a TFSA. The income will grow tax-sheltered.

-Make withdrawals out of your TFSA rather than your RRSP. Income received from a TFSA account will not impact income-tested benefits such as the guaranteed income supplement, old-age security and the age credit. Canadians who receive these benefits could potentially reduce their taxes.

“When thinking about the TFSA and how Canadians can apply it to their personal financial situation, I would recommend that they look at how they use their traditional savings account and consider using the TFSA instead to earn tax-free growth,” said Riley. “The TFSA is a tool that should inspire Canadians to save because of its added benefits and versatility.”