# kickstart your savings for 2011 TFSA



## the-royal-mail (Dec 11, 2009)

"Savers know the best things in life are tax-free. Grow your tax-free savings faster with the 2011 TFSA Kick Start Account."

http://www.ingdirect.ca/en/landingpage/kickstart/

Interesting concept. I wonder if there's a market for this.


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## Addy (Mar 12, 2010)

It sounds interesting, and I'm curious to find out more. Did you notice what the bonus interest is? I assume its a % but I can't see it anywhere.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> "Savers know the best things in life are tax-free. Grow your tax-free savings faster with the 2011 TFSA Kick Start Account."
> 
> http://www.ingdirect.ca/en/landingpage/kickstart/
> 
> Interesting concept. I wonder if there's a market for this.


It was all the rage during the first year of TFSA i.e. about the same time in 2008.
Both ING and PCF had this offer going.
I don't recall similar offers last year, but it appears they are now back.
The bonus interest is expected to compensate you for the extra tax you will have to pay between Oct - Dec.
It's a typical bait and switch.
The interest rates on TFSA savings accounts are very low.
And most of the banks pulled the bait and switch in 2009 by offering higher interest rates between Jan - Mar and then dropping them to abysmal lows later.
IMO, TFSA should not be held in a savings account.


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## Four Pillars (Apr 5, 2009)

I did the "kick start" account for the last 2 years. If you already have the $$ cash saved up early, then it is an easy way to make your TFSA contribution early and then you can forget about it.

As for crappy interest rates...yeah, what else is new???


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## the-royal-mail (Dec 11, 2009)

I find Harold's post to be a bit confusing as it seems to contradict what the site says. But maybe I've misunderstood. I'm reading that they hold that money in some non-TFSA holding account off to the side and then on Jan 1 automatically place it into your official TFSA. If that's true then there should be no tax payable. 

I disagree that the rates are low on TFSA accounts. If you compare the rates on many TFSA's to the so-called high interest savings accounts they are the same or very close. At the royal bank for instance, their high interest savings account and short term cashable GIC's all offer the same as what I can get in a more flexible TFSA that gives me near-instant access to my cash in case of emergency. Last time I checked, this rate was 1.25%, far more than that available in any of their regular accounts. When interest rates rise, so will the rates offered on TFSA's. I find them very competitive.

I also don't know what the actual ING bonus interest rate is. Since they are choosing to be cagey about it I am guaranteed not to invest my money there.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> I find Harold's post to be a bit confusing as it seems to contradict what the site says. But maybe I've misunderstood. I'm reading that they hold that money in some non-TFSA holding account off to the side and then on Jan 1 automatically place it into your official TFSA. If that's true then there should be no tax payable.


There is tax payable because the funds will be held in a non registered account between now and Dec 31st.
Whatever interest you earn during these 3 months, you have to pay tax. 
This is indicated in the FAQ section )



> I disagree that the rates are low on TFSA accounts. If you compare the rates on many TFSA's to the so-called high interest savings accounts they are the same or very close.


True, but what I was trying to say is that (IMHO), savings account is not the best use of TFSA.


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## the-royal-mail (Dec 11, 2009)

Yeah that's a whole other debate of course. You are probably right but I like to use this account to house my emergency fund in CASH and get the highest possible interest [at my own bank]. It's simpler this way. For 2011, you'll be glad to know I'm considering a claymore etf in a new tfsa though. 

AFA the interest, now I understand. Thanks for clarifying. If we assume 0.5% interest per year/12 months x $5K comes to $6.24. The tax on $6.24 would be negligible at best, unless I understood correctly that the gov't was taxing the proceeds of overcontributing to TFSA's at 100%. Those sneaky buggers, helping themselves to my $6.24.


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## m3s (Apr 3, 2010)

I did this the first year. We're talking under $20 taxable interest x 2 if you invest the full $5000 on Oct 1 (1.5% doubled for 3 months)

With the bait and switch promo rates and double interest etc it averaged out to about 2% over the year, surprise it's about the same as those offering 1 rate for the year



> True, but what I was trying to say is that (IMHO), savings account is not the best use of TFSA.


After year 1 of TFSAs I realized the same


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## Guest (Oct 14, 2010)

Hello mode3sour ... I agree, using a TSFA for savings is not the best use ... mine's with Qtrade, it's a trading account, and so for me it's higher risk and so hopefully a higher return ... a higher tax free return. At $5K per year, in say 5 years that's $25K to invest in equities ... tax free. So suppose AC.B does make it to $10 over the next 5 years ... nice.


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## Jungle (Feb 17, 2010)

rikk said:


> Hello mode3sour ... I agree, using a TSFA for savings is not the best use ... mine's with Qtrade, it's a trading account, and so for me it's higher risk and so hopefully a higher return ... a higher tax free return. At $5K per year, in say 5 years that's $25K to invest in equities ... tax free. So suppose AC.B does make it to $10 over the next 5 years ... nice.


To a certain extent. With US dividends being withheld in TFSA, it's not perfect, but I'm not complaining, it was a nice move for us overtaxed Canadians. 
If you are looking at long term, high growth, I agree. The ability to use this account as a retirement vehicle could help you offset clawback on gov pension.


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