As consumers bring their budgets in line for the new year, financial planners are encouraging Canadians to consider tax-free savings accounts that will be available as of Jan. 1.

The accounts, which were announced by the federal government in last spring's budget, are designed to encourage Canadians to increase their savings.

"It has a number of benefits and there are a number of ways that you can be more flexible with your saving," said John De Goey, a Toronto-based certified financial planner with Burgeonvest Securities.

"Whether you have a short-term goal or a longtime goal, whether it's for retirement or something else."

Consumers over the age of 18 will be able to deposit a maximum of $5,000 per year into a TFSA. The money deposited cannot be deducted from taxable income, but investments in the TFSA will grow tax-free and consumers can withdraw their money at any time, though some institutions will charge hefty withdrawal fees. Unused contribution room can be rolled forward.

BMO economist Michael Gregory said the new savings account will likely be popular, particularly among younger Canadians saving for their education or to purchase their first home.

He also notes the accounts will appeal to older consumers because unlike RRSPs, money saved in the account will not have to be converted into a RIFF (registered retirement income fund) by age 71.

"Canadians have to start saving more in order to generate the wealth they need to fund their retirements, and that demographic clock is ticking," Gregory said.