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In this video, we go over the contribution room available to you with your TFSA account, as well as how and when to withdraw funds from your TFSA account.

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TFSA accounts have a limited contribution room which you are not allowed to exceed. It is important that you know what your contribution limit is, since if you contribute more to your TFSA than you are permitted, you will be fined any the government in the subsequent year.

The TFSA contribution limit depends on your year of birth, assuming that you've lived your entire adult life in Canada. I present a chart in the video where you can see exactly how much contribution room you are afforded for your TFSA depending on which year you were born in. Note that you do not have to be a Canadian citizen or even a permanent resident in order to receive TFSA contribution room; as a matter of fact, you will be afforded this luxury even if you live in Canada only on a work visa, or a student visa.

The best way for you to determine what your contribution room exactly is, is to sign in to your CRA (Canadian Revenue Agency) online account, where it is clearly stated exactly how much more you are allowed to contribute to your TFSA before the end of the year. Going forward, each year every Canadian resident will receive an additional $6,000 contribution room to their current contribution limit.

The government also provides you with a $2,000 buffer zone on top of your contribution room, just in case you make an honest mistake and contribute a bit more that you were actually permitted to do so. For example, if you have $30,000 of remaining contribution room, but you contribute $31,000 by mistake, you will not receive any penalties as your excessive contribution still falls within that buffer zone. However, if you mistakenly contribute $40,000 to your tax free savings account account, then you will be penalized for the excessive $8,000 contributed in the following year.

It is a good idea to have an emergency fund in a high interest bank account, so that you can always rely on it in case of emergencies or if any unexpected expenses come up. Feel free to check out my video on the Best Chequing Account in Canada where I discuss which Bank Accounts are the best to have and why. Ideally, you would save about 3-6 months worth of your expenses in your emergency fund, so that you always have enough cash on hand for these unexpected expenses.

If you still need to withdraw funds from your TFSA, it is best to do so closer to the end of the year rather than earlier in the year. The reason for this is that once you withdraw funds from your TFSA account, you will only regain that contribution room next year, meaning that until the end of the year, you will not be able to replenish your TFSA account. Therefore, it is best to withdraw in the last few months of the year, so that you can immediately regain that contribution room in January.
If you take out your money from your tfsa early in the year, you will lose that contribution room for almost an entire year, which means that you will miss out on a year of tax free returns on investments that you could've had on that amount of funds.

As always if you have any questions about any of the stuff we discussed in this video, feel free to comment down below and let me know. I will reply to every single comment and answer every question to the best of my ability...