The top 10 TFSAs

James Rodriguez James Rodriguez  updated on 2022-04-11
TSFAService FeesTypes of InvestmentsRatesOpinions and Advantages Submit
Laurentian Bank of CanadaNone
  • Cash
  • GICs and Term deposits
  • Mutual funds
1.2% to 1.75%
  • Returns up to 1.75%
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TD BankNone
  • Mutual Funds
  • TD Canada Trust Funds
  • GICs and Term Deposits
  • TD Direct Investing
0.05% to 0.85%
  • Self-direct investments
  • Returns up to 0.85%
Start investing
RBCNone
  • Saving deposits
  • GICs
  • Mutual Funds
  • Portfolio Solutions
0.05% to 0.5%
  • Returns up to 0.5%
  • Guaranteed investments
Start investing
iA Financial GroupNone
  • Guaranteed Interest Funds
  • Mutual Funds
  • Daily Interest Fund
0.4%
  • Daily interest or guarantees
Start investing
DesjardinsNone
  • Guaranteed fixed-rate investments
  • Market-linked guaranteed investments
  • Desjardins Funds
  • Savings
0.1%
  • Desjardins funds are among the best on the market
  • Fixed-rate investments
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TangerineNone
  • Tax-free GICs
  • Tax-free investment funds
  • Tax-free securities and ETFs
  • Savings
0.1%
  • Wide variety of investments
Start investing
National BankNone
  • GICs
  • Self-directed investments
  • Managed solutions and investment funds
  • Cash advantage solution
0.05%
  • Autonomy with self-directed investments
  • Enhanced Cash advantage solution for superior performance
Start investing
BMONone
  • GICs
  • Bonds
  • Mutual funds
  • Exchange-traded funds
  • Stocks
0.05%
  • Many investment assets
Start investing
The best TFSA of 2022

Introduced by former Minister of Finance Jim Flaherty in 2009, the TFSA, or tax-free savings account, is one of Canada’s most powerful tax-advantaged saving mechanisms. Millions of Canadians take advantage of this tax-free saving plan.

Did you know that by 2018, there were 20,779,510 TFSAs in Canada? And that there were more than 14,691,280 unique TFSA holders with a total fair market value of $298 billion? Talk about a success!

TFSAs are a great way to save for your future. This article shows you everything you need to know about TFSAs, including how to open an account and what investments are allowed.

What is a TFSA?

A TFSA, or tax-free savings account, is a federally registered savings plan. Their main advantage is that interest earned, capital gains and dividends are not taxed. You can withdraw these earnings without paying taxes.

TFSAs are a relatively new savings tool that has quickly become very popular. They were only launched in 2009, but are now widely used. The TFSA in Canada is a compelling supplement, or alternative, to saving with an RRSP, or a Registered Retirement Savings Plan.

How does a TFSA work?

A TFSA works differently from a traditional savings account. There are restrictions about when and how much you may contribute. Rather than just holding cash, they may hold a wide range of investments including:

If investments held in a TFSA grow, you are tax-exempt from these earnings. This means that despite the limitations, TFSAs are an important part of your financial planning.

Contributing to a TFSA

Each year, the federal government determines the annual amount that individuals may contribute to a TFSA. Your overall annual contribution limit takes into account:

  • The government's annual dollar limit
  • Your unused contribution room carried forward from previous years
  • Any withdrawals or re-contribution you made in previous years

For example:

If the government-set limit in a previous year was $6,000 and you contributed $3,500 to your TFSA in that same year, the remaining $2,500 of contribution room is not lost. It is simply added to your limit in the future. So, if the government limit the following year was also $6,000, your overall contribution limit for that year would now be $8,500 (the remaining $2,500 from the previous year plus the $6,000 for the current year).

This example is on the assumption that you have otherwise maximized your annual allowable contributions since 2009. If not, unused contribution room from other years carries over. If you have neglected to contribute to a TFSA for several years, you may be able to make a sizeable contribution today.

Want to get started investing in your TFSA? Compare the providers at the top of this page and speak with an investment expert today!

How much can I contribute to my TFSA?

The TFSA contribution room for 2022 is $6,000. As of the time of writing in 2022, the lifetime limit contribution in a TFSA is $81,500. This assumes you were at least 18 years when the program started in 2009. Since the Canada Revenue Agency releases updates from time to time, the $6,000 per year figure number is likely to change in the future.

Withdrawing from a TFSA

If you have a TFSA, you can generally withdraw any amount from it at any time. Functionally, withdrawals are like traditional savings accounts you are already familiar with. Withdrawals are tax-free so you don't have to report them during tax season, even if they grew!

There is one minor point to keep in mind. If you do make a withdrawal, you must wait until the following year to have that amount added back to your TFSA contribution room.

Who can open a TFSA?

Any Canadian citizen or resident of Canada who is 18 years of age or older with a Social Insurance Number (SIN) is eligible to open a TFSA.

An individual can open and contribute to a TFSA in the year that they turn 18. For example, an individual who turns 18 in 2022, is eligible to contribute up to $6,000, the year's TFSA limit.

Non-residents of Canada who have a valid SIN and who are 18 years of age or older are also eligible to open a TFSA. They are, however, subject to a tax of 1% per month for contributions made while being a non-resident.

What are the benefits of a TFSA?

There are many advantages to a TFSA. There is a reason that they have become so popular. Benefits of opening a TFSA include:

  • Invests grow without taxes being owed
  • Quick and easy to withdraw
  • Flexible investment options
  • No forced withdrawls (unlike RRSPs once you hit 71 years old)
  • Withdrawals do not count as income
  • Because they are tax-free TFSAs are nice vehicle for leaving an inheritance

What are the downsides of a TFSA?

There are a few disadvantages to be aware of with TSFAs:

  • Contribitions are not eligible for a tax deduction (meaning unlike an RRSP you can't lower your taxable income by contributing to your TSFA)
  • TFSAs are not shielded, meaning the money is potentially exposed to creditors and lawsuit rulings
  • Very easy withdrawls may be a problem for undisciplined investors.
  • The rules and tracking contribution room are complicated

How can I open a TFSA?

You can open a TFSA account directly through many financial institutions and insurance. They will need your Social Insurance Number and your date of birth. Depending on the institution they may request additional supporting documents when you apply. Ensure you provide accurate information. If you fail to do so, your registration could be denied, causing money sent to the account to count as taxable income.

Are you unsure who offers the best TFSA for you? You can quickly compare the most popular options on the market and apply.

What types of TFSAs exist?

There are three types of TFSA:

  • Deposit
  • An annuity contract
  • An arrangement in trust

Here is how they each work:

Deposit TFSA

A deposit account allows you to simply put your money into a TSFA. You may withdraw it at any time.

An annuity contract TSFA

An annuity contract allows you to withdraw and add the amount withdrawn back the following year.

An arrangement in trust TSFA

An arrangement in trust TSFA is designed to allow the legal owner to designate a successor holder. The successor holder can make tax-free withdrawals when the owner dies. Withdrawing from this tax-advantaged account doesn't affect the personal TSFA of the successor holder. The holder can continue to run their own TSFA without any limitation.

How many tax-free savings accounts can I have?

You may open multiple TFSAs, but the TFSA contribution limit does not change. The money deposited across all your TFSAs must not exceed your annual limit for the year.

For example, the TFSA limit for 2022 is $6,000. So, if you have multiple TFSA, your contributions into the accounts might be $2,000 in one and $4,000 in another.

Maxed out? You may give money to your spouse to contribute to their TFSA.

Which is better: TFSA vs RRSP?

A TFSA is very different functionally from an RRSP (Registered Retirement Savings Plan) even though both are mechanisms that let allow you to save. Here are the main differences you need to know:

RRSP

  • Is an account that will enable you to save pre-tax income but requires you to pay income taxes upon withdrawal.
  • You may claim tax deductions.
  • Allow you to save more, but the savings vehicle comes with strict rules that limit how much you can withdraw and for what purpose.
  • Enable you to save up to 18% of the previous year's income.
  • Must be changed to a Registered Retirement Income Fund (RRIF) when the owner turns 71.

TFSA

  • Allow you to save after-tax money.
  • You will not pay taxes on withdrawals.
  • Have a smaller contribution limit, but is much more flexible.
  • You cannot claim tax deductions
  • You may replace money you have withdrawn.
  • Never expire.

Which bank has the highest interest rate on TFSAs?

TFSA interest rate varies from one bank to another. They currently range between 0.05% and 1.50% for savings accounts within a TFSA. In 2022, Manulife and EQ Bank are among the top offering high-interest savings rates on TFSAs. Below is a table outlining TFSA interest rates from major financial institutions in Canada.

Financial institution Interest rate 
Manulife TFSA1.50%
EQ Bank TFSA1.25%
BMO TFSA0.8%-2.5%
CIBC TFSA1.25%
RBC TFSA0.75%
TD Bank0.2%
Highest interest rates for TFSA

Remember that TFSAs can hold many different types of investments. Higher-risk investments like mutual funds, ETFs and individual stocks can mean significantly growing your initial investment.

What is the TFSA Contribution Limit?

The TFSA contribution limit for 2022 is $6,000.

The cumulative total since its inception is $81,500.

The annual limit hasn't always been $6,000. Throughout the years, it has changed a few times. Below is a table showing how the contribution limit has changed from year to year since 2009:

YearContribution limit
2009$5,000
2010$5,000
2011$5,000
2012$5,000
2013$5,500
2014$5,500
2015$10,000
2016$5,500
2017$5,500
2018$5,500
2019$6,000
2020$6,000
2021$6,000
2022$6,000
TFSA contribution limits by year

TFSA contribution resets January 1st of every new year.

How do I invest my TFSA into stocks?

You can easily buy stocks using a TFSA account. You may purchase either individual stock or mutual funds. Major banks and online providers like Wealthsimple Trade and Questrade give you this option.

You may purchase individual stocks as long as they appear on a Designated Stock Exchange (as recognized by Canada's Minister of Finance). This includes more than 40 exchanges including major Canadian, American and European exchanges.

When you buy stocks using funds in a TFSA, you won't pay taxes on capital gains. This means that if you sell the stocks for a higher price, the profits made are not taxable. This makes TFSAs one of the best ways to buy stocks.

Want to invest in US stocks? You can now open a TFSA with US dollars. While these earnings will be tax-free in Canada, US taxes on capital gains may apply.

How much TFSA room do I have?

Calculating your remaining TFSA room feels a little tricky, but it doesn't have to be.

Remember that your TFSA room resets annually. Your annual room is the year's contribution limit minus what you've already contributed.

Need your lifetime cumulative limit?

As of 2022, assuming you were 18 in 2009, you may have contributed up to a total of $81,500 into your TFSA. Simply subtract any contributions you have ever made to calculate how much unused contribution room you still have.

An individual who turned 18 or became a resident of Canada after 2009, will calculate their TFSA room based on the first year they were eligible to contribute. For example, if you turned 18 in 2015, you would have a maximum of $50,500 in contributions.

Need the verify the exact amount? You can check directly with the Canada Revenue Agency via:

You must always take note of your TFSA room to avoid exceeding the limit! Excess contributions are subject to penalties of 1% tax per month on the amount over the contribution threshold).

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