My bank pays 1.03 per cent interest on TFSAs. I imagine that is about the same as other banks. So, if I had put $5,000 in a TFSA about a year ago, I would have earned $52.50. However, with inflation hovering around two per cent, the purchasing power of my money would have fallen to $4,951. I would have become poorer by about $49. It would have been much worse had I intended my $5000 to fund a purchase (a holiday perhaps) in the U.S.
Over the year, the loonie depreciated nearly 20 per cent against the US dollar. My $5,000 would be worth about $3,950 U.S. I would have become poorer by more than $1,000. At the same time the federal government would have forgiven me the tax on $52.50. At my income the marginal tax rate is 22% so my tax saving for the year would have been $11.55. That works out at about three cents per day, about as much as I win or lose when the clerk at the checkout rounds my bill to the nearest nickel.
Ross Pearce
Prince George
