No lifeline here

Let me be clear: I am no apologist for over-spending Canadians who have no regard for balancing their household books and who max out the credit cards just to keep up with the Joneses.

But I do care about hard-working families whose incomes have not kept pace with skyrocketing costs of necessities such as heat, electricity, gas, insurance, property taxes, and on and on.

As the Vanier Institute points out, a job loss would push many over the eadge.

No, it's not everybody, and some boomers are even enjoying the trillion dollars in inheritances now trickling down.

But the fact is Canadian households now owe $1.1 trillion or 131% of their household income -- which is a ticking time bomb as the subprime mortgage crisis escalates.

Now is the time to throw a lifeline to consumers, who can barely keep up with the bills, let alone invest.

Instead, Finance Minister Jim Flaherty gave us Tax-Free Savings Plans, where starting in 2009 we can sock away $5,000 a year using cash, GICs, mutual funds, bonds, stocks and any other investment that's eligible for RRSPs, and the taxman can't tax the gains.

The difference between RRSPs and these new babies is there is no immediate tax refund. For example, it you invest $2,000 in a RRSP by midnight tomorrow and if you're in a 40% tax bracket, you'll get a $800 tax refund when you file your 2007 income taxes.

But, unlike an RRSP that you invest in until age 71, you can cash out your savings account and pay no tax.

Question is: Where do you park your money -- RRSPs or tax-free savings accounts? And what about RESPs?

"It's a balancing act, but people should sit down with an adviser and figure out what works best for them," said Linda Knight, president of BMO Mutual Funds.

A new BMO survey shows more than half of Canadians are not making an RRSP contribution this year, while one-third are waiting for the last minute.

The bottom line is many Canadians can't afford to max out their RRSPs because they don't earn enough.

Knight says the new savings account will be attractive for seniors who aren't yet 71 and have no RRSP room, and younger Canadians who want to save for something special, like a car.

I'm all for Canadians getting back into the savings habit. But they've got to get out of debt first.

Finance Minister Jim Flaherty hopes the new Tax-Free Savings Plan introduced in the federal budget will encourage Canadians to sock away the savings.