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Treat Small Money Like Big Money

We continue to be perplexed by the number of investors that have not realized the potential of the tax free saving account. The amount of allowable contribution to these vehicles has been increased twice since inception. Money grows tax-free and can be withdrawn tax-free. They should no longer be treated lightly.

Here is the math. If a 50-yr old couple continues adding their current combined 20k per year allotment for the next 20 years to their already existing 82k that could have been jointly deposited since the beginning, and make an average 8% return, they will have $1,370,000 in this ‘no longer little’ account when they are 70. If one of their goals was to leave behind a helping hand to family members this is the only strategy they would need.

What amazes us the most is that most of these get opened at banks where people already have their regular operating accounts. The majority of them seem to have been just sitting collecting very low interest all this time instead of being fully invested like the rest of their accounts. They seem to be content thinking they must be saving tax, but you don’t pay tax anyway if you don’t make any money. Of course the bank is very happy to pay you nothing and make their money with your money.


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