Yesterday we discussed why Tax Free Savings Accounts are a good idea: with a TFSA your savings grow tax free. With no taxes to pay, your savings grow faster.
The second reason why a Tax Free Savings Account is a good idea is that it’s a great way to “hide” your money. You are not hiding the money from the government; they know where it is; you are hiding your money from you!
Think about it: if you have $20 in your pocket, it is very tempting to spend it. If you have $20 in your bank account, it is slightly less tempting to spend it, because it is less convenient to get the money. To get money from your bank account you either have to go to the bank, or use your bank card to make a withdrawal or payment.
With a TFSA, it’s even more difficult to get your money. You have to specifically apply to the bank to get the money out. You have to fill out the form on-line, or go into your bank to do it. It requires some effort. It takes some time. You will have to consciously decide to take the money out. That’s much more difficult than simply taking it out of your pocket or purse.
So, the second reason a Tax Free Savings Account is a good idea: it makes it more difficult to get at your money, so it’s more likely you will save your money.