Tax-Free Savings Accounts

The Canadian government introduced tax-free savings accounts (TFSAs) in 2009 to encourage investors to save money for short and long-term goals. Individuals who are at least 18 years old, have a Social Insurance Number and whose name is on the account can open a TFSA. As of 2011, investors can contribute up to $5,000 Canadian dollars annually. Investment earnings in the TFSA are tax-free while in the account and when withdrawn.

Children's Savings Account

Charter banks in Canada offer children's savings accounts with reduced fees or no monthly service fees for customers up to age 19. Canadian banks allow parents of children up to age 12 to open a bank account in a child's name with eligible personal identification for both parent and child. The account holder uses the money in the account for short- or long-term goals and pays taxes on any interest earned in the account.

Informal Trust Account

Individuals, groups of people or organizations can open an informal trust account for one or more beneficiaries. There are no restrictions on the use of money held in trust accounts. The party who opened the account is responsible for taxes on interest or other investment gains. Any children who are beneficiaries of the trust account can claim their share once they turn 18.

Registered Education Savings Plan

A registered education savings plan (RESP) is a government-regulated account for post-secondary education. All beneficiaries under 16 are eligible for a maximum annual grant of five hundred Canadian dollars, the equivalent of five hundred and eight U.S. dollars. Grants are available with restrictions for 16- and 17-year-olds. Investment income grows tax-free in the plan. Once the child goes to college and withdraws the funds, he must pay the taxes on the interest or investment income.