ING Direct, now called Tangerine, spent a great deal of money mailing me an ad recently asking me to open a TFSA Kick Start Account. Should I? For those who didn’t get the ad, here’s the offer:

• You put up to $5500, the maximum new contribution to a TFSA for 2104, into a special savings account at ING Direct Tangerine.
• You earn the regular daily interest rate (currently 1.35%) on that money until the end of December 31.
• They will add up how much interest you earned till the end of December 31, and double it.
• On January 1, 2014 ING Direct Tangerine will automatically contribute up to the maximum of $5500 of the money and interest in your special savings account to your ING Direct Tangerine TFSA.
• If there is more than $5500 in the account, the extra (in other words the interest) will be deposited into your regular ING Direct Tangerine savings account. That’s because you can’t contribute more than $5500 to your TFSA in 2014 unless you have unused contribution room from previous years which ING Direct Tangerine has no way to know about.
• If you don’t have a regular ING Direct Tangerine savings account, they will automatically create one for you.

How Much Money Could I Make from an ING Direct Tangerine TFSA Kick Start Account?

What is it with you readers and money? Don’t you want to do this just to make ING happy?

Ah well. Say you had put the entire $5500 maximum 2014 TFSA new contribution into an ING Direct Tangerine TFSA Kick Start account on October 1, 2013. Say ING Direct Tangerine keeps the current interest rate of 1.35% until January 1, 2014. (Which is pretty likely: their rates don’t change often.) For one year at 1.35%, $5500 would earn about $74.75 in interest. For 3 months, it would earn about $18.58. (There’s a nice calculator on the ING Direct Tangerine website, if you want to play: https://www.tangerine.ca/en/calculators/calculators.html#isa. Putting your money into this TFSA Kick Start account earns you the regular interest that you would get anyway on your money PLUS it doubles the interest earned to the end of December 31 just before it transfers the money into your TFSA account. That means if you put in the full $5500 on October 1, 2013, you would earn about $18.58 more than if you didn’t open a Kick Start account.

You can see that’s not a lot of money! However, around here, that’s enough money for 2 of us to go for dim sum including tax but not including tip. Or for all 4 of us to have a hefty lunch at home. And it’s “found money” because it doesn’t cost us anything to get it. So we’re going ahead and opening a Kick Start account.

UPDATE: Please be aware that as of January 2015, Tangerine has started charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

Given that change, I would no longer recommend the Kick Start program unless you plan to keep your TFSA money at Tangerine for the long term.

Other Advantages of an ING Direct Tangerine TFSA Kick Start Account and  Tangerine TFSAs

It’s incredibly easy to contribute. If you already have the money in another ING Direct Tangerine account, in about 2 minutes you can complete the entire process, including reading all the legal terms and conditions. (You DO read all those legal things before you click “I accept” don’t you?!)

For a Ready-Cash TFSA

If you are investing your TFSA in a daily interest savings account because you need the cash readily and quickly available, ING Direct Tangerine’s Tax Free Investment Savings Account offers a reasonable rate of interest. As of October 4, 2013, it is paying 1.35% per year. (Some trust companies, however, are paying 3% a year.)

For a “Couch Potato Equities and Bonds Mutual Fund” TFSA

If you are going to invest your TFSA money in a “couch potato” mutual fund manner, you can invest at ING Direct Tangerine in their Streetwise funds. According to the Canadian Couch Potato (Read: the One Fund Solution)  this is a reasonable choice.

For a GIC-Only TFSA

If you are ultra-conservative and only want to invest your TFSA in GICs, you could do so within your ING Direct Tangerine TFSA. The drawback is that their GIC rates are not as good as those you can get within a self-directed brokerage account at BMO InvestorLine, or even Investor’s Edge which does not offer as good a selection as InvestorLine. If you have enough money in your TFSA to avoid paying any annual fee for a TFSA account at InvestorLine or Investor’s Edge, you may want to consider opening an account there. You don’t have to buy stocks to use a brokerage account. For example, today, October 4, 2013, the TFSA GIC rate

• at ING Direct Tangerine for a one-year term is 1.35% and
• for a 5-year term is 2.25%.

(Note: the TFSA daily interest savings rate is 1.4% so don’t buy a one year GIC unless you really expect rates to drop!) The best TFSA GIC rate at InvestorLine today

• for a one-year term is 1.96% from Home Trust and
• for a 5-year term is 2.91% from Canadian Tire Bank.

One curious feature of ING Direct Tangerine is they offer GIC “sales” from time to time. For example, on Cyber Monday (the Monday after Black Friday) they often offer a special rate on GICs or other products. During one such sale, I picked up a 3% rate on a GIC, about double their regular rate. It’s worth keeping an eye on your ING Direct Tangerine “flyers.”

Drawbacks of Opening an ING Direct Tangerine TFSA Kick Start Account

• Tangerine will start charging a fee in January 2015 to transfer TFSA money to another financial institution.
• If you want to move the cash to a self-directed brokerage account TFSA in 2014 you will have to fill out a T2033 for that brokerage in 2014 and send it to ING Direct Tangerine. (Tangerine will require a signed original T2033.)
  • For brokerages like Investor’s Edge, you may also have to visit your CIBC branch to get a rep there to send a copy to Wholesale Brokerage Accounts.
  • For brokerages like InvestorLine you can just mail it directly yourself.
• You will have to wait for the cash to transfer from your ING Direct Tangerine TFSA to your self-directed brokerage account TFSA in 2014.
• You might have to pay a fee, if ING Direct Tangerine changes its “no fee” policy between now and the date you make the request to transfer the funds. As of October 4, 2013, ING Direct Tangerine does not charge to transfer funds out of a TFSA. If you want to move the money to a TFSA at another financial institution in 2014. UPDATE: Tangerine will start charging a fee in January 2015.
• you will have to wait up to 4 weeks for the money to get transferred. (Although a recent transfer from ING Direct Tangerine to Investor’s Edge took only 12 business days.)

If, like me, you want to go ahead and seize that $18 and change with both hands, here’s how:

How to Set Up a Tangerine TFSA Kick Start Account

1. Log in to your Tangerine account.
2. Do NOT click on the big ad that says “Open a 2014 TFSA Kick Start Account. Until they fix it, that link signs you out of your accounts and takes you to a screen for someone who doesn’t bank with Tangerine! (I know because I tried it a few times and I even reported it to their telephone reps.) Instead, click on the tab: Open new account
3. From the list of six items, click on the Tax-Free Savings Accounts link.
4. A list of items will appear. Click on Open a 2014 TFSA Kick Start Account
5. Read the information about how the account will work. Note that on January 1, 2014:
   • Up to $5500 from the account will be transferred into your existing Tangerine TFSA account.
   • If you have more than $5500 in the account, due to interest, the interest will be deposited into your Investment Savings Account because the maximum new contribution permitted for 2014 is $5500. If you don’t have an ISA they will create one automatically for you.

   If you agree with the plan, click on the Next button.

6. Review your name, address, date of birth and SIN. If they are correct continue.
   • In the Amount field type the amount of money you want to contribute today to your TFSA Kick Start account.
   • If desired, change the name in the Nickname field to some other name. The default name is 2014 TFSA Contributions.
   • From the drop-down list, select which account to withdraw the Amount from. For example, I selected my chequing account.
   • The Effective Date is the date the withdrawal will be made. If desired change it to some specific date. I left it at the default of today’s date.
   • Answer the Legal questions.
   • When you are sure your information is accurate, click on the Next button.
7. On the next screen, review the details of what you have asked to have happen. If it all looks fine, click on the Go button.
8. Make a note of your new account number and the confirmation number for your records.
9. If desired, click on View My Accounts to see if the new TFSA Kick Start account is there. If you funded it from another Tangerine account, it should have your money in it already. If you funded it from an external bank account it may take a business day or two for the funds to show up.
10. If you are finished banking, click on: Log me out. For added security, clear your browser cache and close your browser session.

The Secret Reason I’m Really Opening a Kick Start TFSA Account

OK, I’ll admit to one more reason (although I really like dim sum.) When TFSAs were first invented, I opened one at Tangerine. I’ve since moved most of the cash out of it, but not all of the money. So I need to do a transfer one of these days soon to clear out the rest of the money and take it over to my brokerage account TFSA. Since I’ll have to fill out a T2033 anyway, I might as well lob in next year’s donation, leave it till January 2, then move the entire amount over and out. Having my 2014 contribution in there will give me the motivation to get it moving.

UPDATE: Please be aware that as of January 2015, Tangerine has started charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

Given that change, I would no longer recommend the Kick Start program unless you plan to keep your TFSA money at Tangerine for the long term.

Related Reading

• Examples of TFSA Portfolio Fees and Commissions Using InvestorLine and Investor’s Edge

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Will you bother to open a TFSA Kick Start Account? What’s your favourite selection when you have dim sum? Please share your views with a comment.