Which of the following accounts allows for tax-free growth on contributions?

The choice of a Tax-Free Savings Account (TFSA) is correct because contributions made to a TFSA grow tax-free, meaning that any income or capital gains earned within the account are not subject to taxation, even when withdrawn. This feature allows individuals to accumulate savings and investments over time without the burden of taxes impacting their growth.

TFSAs are particularly advantageous as they offer flexibility in contributions and withdrawals. You can withdraw funds at any time for any purpose, and those withdrawals do not affect your contribution room for future years. This makes TFSAs a popular choice for both short-term saving goals and long-term investment strategies.

In contrast, the other accounts mentioned do not provide tax-free growth in the same manner. For example, a Registered Retirement Income Fund (RRIF) and a Life Income Fund (LIF) are both designed for income generation during retirement, and withdrawals from these accounts are taxable as income. Similarly, a Registered Retirement Savings Plan (RRSP) allows for tax-deferred growth on contributions, but taxes are applied when funds are withdrawn. Therefore, the TFSA stands out for its unique combination of tax-free growth and flexibility in managing personal finances.