<prompt> Human: It seems like its just a 5kyear tax credit with no cost or penalty, but that cant be right can it?  <response>: It is absolutely not a tax credit.It is exactly what it says it is: a tax-free savings account.When you turn 18 you begin to accrue 5K per year which you can deposit into your TFSAs. It is retroactive - if you were 18 in 2008 you have accrued 5K per year of contribution space.A TFSA is merely a container. You deposit money into this container the book value - up to 5K per year. You then use this money to invest in things. Many of the investments you can make carry some risk. You are not guaranteed income unless you invest in a simple TFSA savings account or GIC.These investments will hopefully now be earning a profit for you. The profit they bring in is non-taxable income. You can withdraw however much you want whenever you want without any penalty or tax considerations. You can not re-contribute if you have already contributed 5K of book value for that year and then withdrawn it. CRA WILL find out because the banks will tell them and you WILL be penalized.Think of it like this - your money the book value is working under the table to bring you back profit that is not taxed. 