Cash in a TFSA (#182)

Most of the time I hate it when people say "the exception to prove the rule". It doesn't make any sense. Except sometimes it does. When it comes to tax-free investing, you want to be in equity. It's because you save tax in three places: dividends, capital gains and income. However, not everybody should be in equity. People who will need the money in less than five years should really be in cash. People who are already living from their savings would also probably not benefit from an equity investment. 

This week, Lorian's 80-year-old dad is our case study in when tax-free investments can be cash. 

Lorian

Dad made good investments, but has a fair bit of cash in a high interest earning account.

He pays high tax due to this interest.

To 'dilute' the pot a bit we are thinking of opening a tax-free bank account and making use of the annual R33k allowed.

If he lives for another say 10 years then that is R330k he keeps out of the taxable pot.

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