Compare the Best TFSA Savings Accounts in Canada 2020

Are you looking to make maximize your savings and investments? You're in the right place! As a registered savings account, tax-free savings accounts (TFSAs) are among the most useful financial tools available in Canada. You can compare the best TFSAs in Canada by using the Ratehub.ca calculator and comparison chart below.

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Purchase interest rate Bank account Included 1st year return
1.6% None $80 Get this rate Get more details
1.3% Unlimited $65 Get this rate Get more details
1.30% $65 Get this rate Get more details
2.15% 0.15% after 150 days unlimited transfers $49 Get this rate Get more details
0.7% Yes $35 Get this rate Get more details
0.1% Interest rate tiers
If balance is Rate
$0.00 - $249,999.00 0.10%
$250,000.00 or more 0.20%
tiered interest rate 		Unlimited no-fee self-service transfers to your other Scotiabank accounts $5 Get this rate Get more details
0.05% Unlimited transactions, plan restrictions apply with regards to when and how much one can contribute $2 Get this rate Get more details
0.05% None $2 Get this rate Get more details
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Interest rate tiers tiered interest rate
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Tax-Free Savings Accounts (TFSAs) are truly unique. As a banking and investment banking account, TFSAs allow Canadians to earn tax-free interest their savings or untaxed gains on their investments.

Additionally, TFSAs come with the flexibility of unlimited, penalty-free withdrawals and contributions. The only catch of a tax-free savings account is the TFSA contribution limit, but even that increases for every Canadian yearly.

Not sure what a Tax-Free Savings Account is exactly? Unsure of what your TFSA contribution limit is? Are you having a good old TFSA vs. RRSP debate? These frequently asked questions about TFSAs can be found below.

What is a tax-free savings account (TFSA)?

A Tax-Free Savings Account (TFSA) is widely considered more of a tax-shelter for savings and investments, rather than merely a savings account. Still, it operates as both. TFSAs shelter your savings or investments from tax, making them incredibly versatile accounts. These investments include Guaranteed Investment Certificates (GICs) stocks, bonds, mutual funds and exchange-traded funds (ETFs), among others.

For liquid assets, tax-free savings accounts typically offer lower interest rates than non-registered, high-interest savings accounts. However, any interest earned is tax-free.

Anyone seeking to open a TFSA must be a Canadian citizen, have a Social Insurance Number (SIN), and at least 18 or 19 years old, depending on the province in which they reside.

How to choose the right tax-free savings account

The most important feature of any type of bank account or investment is its interest rate, and TFSAs are no different. You should always ensure that you’re getting the best interest rate on your deposits—regardless of what type of account it is.

A good interest rate is important for many reasons, but primarily because it keeps should keep up with inflation.

Each year, inflation increases as a result of economic growth. Money loses value—unless it’s earning interest. TFSAs allow money to grow tax-free, meaning your money increases with inflation and avoids taxes.

Keeping all of your money in an account with no interest or with an interest rate lower than 2% will see your money decrease in value each year.

Beware: some accounts offer “teaser” rates that start high at sign-up but drop once the promotional period is complete.

Other features include whether the account charges a monthly fee or transaction fees. You should also be aware of whether the account allows you to transfer money back and forth from your regular chequing account. While TFSAs allow unlimited transfers, the bank or credit union offering them might have their own conditions.

How does a TFSA contribution limit work?

TFSAs come with a contribution limit, known as a TFSA contribution limit. The simplest way to explain how a TFSA contribution limit works are that once you’ve contributed to the maximum amount for that year, you won’t be able to add more until the room increases in the new year. 

However, any unused room gets added to the following year. In other words, unless you’ve reached the contribution limit, you can keep contributing. 

If the money is withdrawn, the contribution limit remains the same for that year but carries forward into the following year once a new year starts.

As of 2019, the TFSA contribution limit is $63,500. This limit applies to every Canadian citizen. Exceeding this limit, your entire deposit gets taxed on a month-to-month basis at 1% each month. 

If you’ve reached your contribution limit for the year, contributing to your RRSP might be the right next step for you, but if that’s also at its limit, consider maximizing your earning potential using GICs and high-interest savings accounts.

Other types of savings accounts

TFSAs are exceptional savings accounts—but not the only ones available to Canadians. Below are the different types of savings accounts that also provide exceptional benefits.

Traditional Savings Account

The most basic savings accounts provided by banks is the conventional savings account. Unless specified otherwise, a savings account provides interest less than 1.05%.

High-Interest Savings Accounts (HISAs)

High-Interest Savings Accounts (HISAs) offer interest over 1.05%. Unlike the TFSA, income tax is charged on interest earned, as it is a non-registered account. They do offer high-interest, however, and are excellent options to reach short-term savings goals.

Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a savings plan which offers tax-benefits for retirement saving. Like a TFSA, it comes with a contribution limit.

Youth Savings Accounts

Some banks and credit unions offer exclusive savings accounts just for kids, allowing them to save their own money and learn how banking works. Interest is usually lower, and accessibility is typically limited.

Senior Savings Accounts

Canadians 60 and over can take advantage of seniors savings accounts that have lower transaction fees and other perks just for seniors.

TFSAs vs. RRSPs: Which one is right for you?

The answer to the TFSAs vs. RRSPs debate relies heavily on what your personal goals are. That said, using both certainly have their respective advantages.

TFSAs vs RRSPs are a common topic of discussion in the personal finance world. However, both accounts are quite similar, with minor differences between them.

TFSAs offer interest and tax-free financial growth with unlimited, tax-exempt withdrawals and a contribution limit.

A Registered Retirement Savings Plan (RRSP) offer tax-breaks but does not offer free withdrawals. The account is meant for retirement savings, meaning you will get taxed if you make an early withdrawal. The withdrawals are taxed based on the tax bracket that you fall into. Ensure your deposits don’t exceed your yearly RRSP contribution limit .

If you have money set aside for an unforeseeable emergency in an emergency fund , it’s probably best to make minor contributions into an TFSA, instead of keeping all of your funds parked somewhere that is taxed on withdrawal.

You should still regularly contribute to your RRSP. It will save you money come tax season and have you seeing your financial future in good hands—ensure you're realistic with it!

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