Confusion reigns over the new Tax Free Savings Accounts. One of the biggest complaints -- the fees and costs associated with some of them. Here are some tips for sorting out your options.
Anne Hill just wanted a simple Tax Free Savings Account from her local bank. But when she signed up she was in for a shock.
"It was when I looked at it I saw these other things that I hadn't anticipated,' she explains.
Those other things were fees -- and lots of them.
"There is a withdrawal fee, a transfer fee, a fee for terminating the account, so there were several," she says looking over the list.
Anne had been put into an investment-based account -- when all she really wanted was a savings account.
"You need to consider what kind of an investor or saver you are," advises Greg Hurst, a consultant with Morneau Sobeco who advises businesses on how to help employees save for the future.
"The market place has some very good fee deals out there right now," he explained. "It looks to us that the financial institutions are trying to capture market share."
So that means low-fee or no-fee accounts and higher than normal interest rates.
"If you are maintaining significant balance on savings account on a regular basis a TFSA would make sense for you," he said.
To get the right account and avoid fees tell the financial institution: what you are saving for, how often you plan to withdraw funds in a year -- so you can find out what the fees or restrictions are, and ask them to waive all the fees if you are already a customer with a sizeable RRSP or other business .
If you put stocks or mutual funds into a TFSA, you won't pay tax on any capital gains but there is a downside.
"In a TFSA you won't be able to take any deduction for capital loses," warned Hurst.
Anne's going back to her bank for a simpler account.
"I couldn't believe it really, I really hadn't expected anything as complex as that,' she concluded.
Bottom line -- with Tax Free Savings Accounts you need to ask lots of questions. And get some advice on how to use one to the best advantage for you.
With a report from CTV British Columbia's Chris Olsen.
