When Tiana Mah and her husband renovated their newly purchased home in Vancouver’s Cambie Village area in May, they didn’t apply for a line of credit or dip into a chequing account.
That would have been so 2008.
Instead, they paid for the refinished oak floors, the new bathroom and wiring with money from the new rainy-day fund Canadians are learning to tap: a Tax-Free Savings Account.
“I admit that when I opened it up and I didn’t know that much about it,” said the 30-year old, a communications specialist for the Certified Management Accountants of British Columbia.
Finance Minister Jim Flaherty promised an evolution in Canadian spending habits when he created TFSAs in his 2008 budget. He appears to be getting one.
Tiana Mah and her husband Mark Patterson used the money in their TFSA for bathroom and other renos in their home in Vancouver.
Even as the Bank of Canada and economists express concern that rock-bottom interest rates may cause people to take on more debt than they can afford, new data suggest TFSAs have jolted Canadians into saving at a faster pace than Finance officials expected.
And while the financial crisis has shown how seemingly innocuous policy decisions can go horribly wrong, Mr. Flaherty’s surprise move two years ago to encourage more savings is already paying dividends.
“I am impressed by the take-up,” said Jack Mintz, the Palmer Chair of Public Policy at the University of Calgary who has advised the federal and Ontario governments on tax policy. “It is good news in the sense that Canadians are acting to save for the future. It is important given long run demographic trends.”
Between Jan. 1, when the program went into effect, and the end of June, Ms. Mah was one of about 3.6 million people to set up a TFSA, stockpiling wealth of $12.4-billion, according to an analysis by Toronto-based financial research firm Investor Economics and pollster Ipsos Reid.
