All about the First Home Savings Account
Are you or the young people in your life wondering if you’ll ever be able to buy a home?
Housing affordability is a huge issue for young people today. The Bank of Canada’s Housing Affordability Index – a measure of home ownership versus broader shelter affordability – spiked during the pandemic. The average cost of a home, which is $662,437 in Canada, is seven times the average annual household disposable income, and has doubled in the past two decades. (The national benchmark also masks extreme price valuations in some parts of the country, for example, Ontario and British Columbia where the multiple sits at 11.5 and 12, respectively.)
To help Canadians save towards their first home, the government has introduced a new (as of this month) registered account called the Tax-Free First Home Savings Account (“FHSA”).
The FHSA is “tax-free in; tax-free out” and at a high level can be described as follows:
- for Canadians 18 to 71
- have not owned a home in the current year or past four calendar years
- can contribute up to $8,000 per year
- lifetime maximum of $40,000 over 15 years
- contributions to the FHSA are tax deductible (like an RRSP)
- withdrawals are tax-free if the money is being used for a first home (like a TFSA).
If you have more questions about how the FHSA works, check out CPA Canada’s: Tax-Free First Home Savings Account – your questions answered.
Did you know that April is Financial LiteracyMonth in the US?
Sometimes called Financial Capability Month, it has evolved to focus on the ability to put financial knowledge and skills *into action*, to:
- manage and protect our money,
- build productive financial habits,
- and move closer to our present and future financial goals.
It’s about processing knowledge and information, evaluating options, making informed decisions and taking action. Because the more informed we are about our financial choices, the better our financial outcomes are likely to be.
The Wisest Investment can help parents, grandparents, and any adult that cares about the young people in their life do just that.
If you’re a trusted advisor, it’s also a meaningful gift for clients. Email us at [email protected] to place an order and take advantage of bulk sale discounts. And for your convenience, we now accept credit cards on Canadian and US orders.