Market Brief

While many students put aside some extra savings into their Tax-Free Savings Account, Jamie Golombek says they might want to consider saving in a First Home Savings Account (FHSA). Golombek, Managing Director of Tax and Estate Planning at CIBC Private Wealth, believes the FHSA could be a strong choice for students saving money due to its vast tax benefits and emphasis on saving for a home purchase.

• The FHSA started on April 1, 2023, to help those looking to purchase a home for the first time. The program allows annual contributions of $8,000 and a lifetime maximum of $40,000. Unused contribution room can be carried over to future years. To be eligible for the account, a holder must be a Canadian resident and 18 years of age or older.
• Saving in an FHSA carries many tax benefits. Contributions to the account are tax-deductible, and all contributions and investment income earned in the account can be withdrawn tax-free to purchase a home.
• Golombek noted that students can use the tax benefit in future years, presumably when they are in a higher tax bracket. With any savings plan, the earlier one starts, the more potential for growth over a longer period, making it a valuable savings tool for students.
• The FHSA is not only suitable for students as it could be a valuable account for any age. If you want to purchase a home for the first time, this could be the account to help you save and meet that financial goal regardless of age.

This new product in the Canadian market has plenty of appeal, particularly as home prices have skyrocketed over the last few years. If you are looking to purchase a home for the first time, it is encouraged to start planning early and put together a savings and investment plan to help you meet that goal. An FHSA can be a valuable tool to help you get there.

This is a CIBC Market Brief