TFSA Growth Calculator

Do you know how to make the most out of your savings? We do, and we want to share.

The answer is a Tax-Free Savings Account (TFSA), and it’s one of the most secure and flexible options, allowing you to get the most bang for your buck.

While TFSAs have been available in Canada since 2009, 50% of Canadians still haven’t taken advantage of the account and its perks. If you’re one of those Canadians, or you just want to learn more about how your money could work better for you, we’re here to help.

We’ve crafted an easy-to-use TFSA Interest Calculator and compiled a list of the best TFSA Interest rates in the industry, giving you peace of mind so you can confidently skip to the part where your money grows faster and in a truly convenient way. 

Here we will guide you through some of the most impactful questions to help you see if a TFSA could be your best banking decision of the year.

How does a TFSA work?

While many people believe that a TFSA is just for cash savings, you can actually make a number of personal investments on either a long or short-term basis. One of the best parts however is that you won’t be taxed when you decide to make a withdrawal (which you can do at any time) or be taxed on the interest you gain from your contributions.

You can even choose to manage your own investments, or you can have them managed for you depending on how much control you prefer to have over your accounts.

Types of TFSA contributions include: 

• Cash
• Stocks / Exchange Traded Funds (ETFs)
• Guaranteed Investment Certificates (GICs)
• Mutual Funds

To further help with your financial planning, our TFSA Growth Calculator will be your best friend in determining how a TFSA can best suit you and your predicted return based on your bespoke circumstances.

How does our TFSA calculator work?

To get started, you want to enter your initial contribution into the calculator.

The Canada Revenue Agency (CRA) determines an annual deposit amount (and as a bonus, any years you haven’t contributed, but were eligible to, can be brought forward). This year a standard contribution amount of $6,500 can be made, or a lifetime limit of $88,000 as of 2023.

Making contributions is very convenient as you can either do so in a lump sum or increments throughout the year, allowing a TFSA to be very adaptable to any type of lifestyle. By filling this into the calculator, you ensure the results reflect your personal circumstances.

Each bank or financial institute will have its own TFSA interest rates (some require a minimum contribution rate, typically of $1,000, to open your TFSA) so it is essential to choose the one that fits your financial goals well. We compiled a list of the best TFSA interest rates, so you don’t have to. Once you’ve selected the one that’s right for you, you can enter the rate into the calculator along with the duration you’re expecting to save.

The calculator will output your contribution with the TFSA compound interest showing your total anticipated gains.

It’s important to keep in mind that, unlike an RRSP, your TFSA is good for a lifetime. You can also make a withdrawal at any time without penalty or paying taxes on your ‘income’.

How are TFSA investments managed?

Depending on your confidence level and how hands-on (or off) you prefer to be, you can choose if you’d like to have the bank or financial institution manage your TFSA or if you’d like to self-direct your account. There are advantages to both, so it is important to do what works best for you.

Does a TFSA earn interest?

Yes, you do earn interest on a TFSA.

The interest amount will depend on a few factors such as the bank or financial institute you open your account with and any promotional offers they may have but also how you utilize your account (cash or other qualified investments).

Let's look at a concrete example:

Some banks and financial institutes can charge higher fees to manage your investments. Often this is overlooked when opening the account, particularly when there is a promotional offer or higher interest rate on offer. This can lead people to feel they are getting the best deal possible but can lead to an offset in earnings when it comes to the bottom line. This should be a consideration in determining if you prefer the bank or financial institute to manage your assets or if you will self-direct your TFSA to further avoid potential conflicts with your growth potential.

For the best TFSA interest rates, check for promotions and always compare your options in the market. We’ve done the work for you to ensure you don’t miss out.

What is the average rate of return on a TFSA?

5.8% is the average (medium) rate of return for TFSAs in Canada. This equates to the predicted gain or loss expected for your investment.

On the low side, you can expect to see 3.4% and up to 8.1% on the high side. Many factors affect the rate of return, so we recommend speaking with the bank or financial institution directly for static rates.

How much are TFSA interest rates?

Interest on TFSAs will depend on how you choose to utilize your account, such as the use of cash, stocks, guaranteed investment certificates (GICs), and mutual funds, which can feature different rates.

GICs / High Interest Saving Accounts, for example, offer an average return rate of 3.5% in today’s market (and can also have perks with guaranteed returns) compared to cash in the same TFSA which on average is an interest rate of 0.85%.

Compare the best TFSA interest rates to ensure you’re maximizing your growth potential in line with your personal goals by checking out the list we have curated for you! 

Is there a growth limit for TFSAs?

The growth on your TFSA is limitless!

By comparing the market for options with the highest Interest on TFSAs combined with using a TFSA calculator (like ours), you can maximize your growth potential. Just be aware that while your funds are tax-free, you still need to keep within your annual contribution limits to avoid penalty fees.

Additionally, if you intend to do a substantial amount of trading as a way of passive income from a TFSA, we urge you to proceed with caution as the guidelines from the CRA on ‘business’ trading are rather undefined. If they deem your account is trading too much for personal use, it may be taxed as a business.

How much should I put in my TFSA per month?

Assuming you have fully contributed to your TFSA in the previous year, your standard contribution limit in 2023 is $6,500. Over 12 months this is a $541.66 monthly contribution.

Using our TFSA growth calculator at the top of this page will give you the best indication of how much you should contribute per month without exceeding the contribution limits.

If this is your first TFSA, your contribution limit will also include the limit from the previous years you were eligible as the CRA allows this to be brought forward, making your contribution limit as much as $88,000).

If you have had TFSAs in the past but had unused contribution room from previous years or have made any withdrawals in prior years, this will also affect your contribution limits, so please check out our TFSA contribution calculator to better determine what works best for you.

Is growth in a TFSA taxable?

The beauty of a TFSA is that the capital gains earned on your investments (whether withdrawn or kept in your account) aren’t taxable. This makes a TFSA a very attractive option over other types of investments and saving accounts. 

The possible exception is if you exceed the maximum allowable contribution in your TFSA. Doing so makes you liable to a 1% monthly tax on your monthly excess amount.

How do I calculate my TFSA contribution limit?

The best way to calculate your personal contribution limit is with the help and convenience of our TFSA contribution calculator, which can help you avoid miscalculations that lead to exceeding your annual contribution limit. However, with a bit of intel on your personal circumstances and a touch of math, you can calculate your yearly limit with the following details:

If you have held an account since the inception of TFSAs (2009) and have reached your maximum contribution limit year-over-year prior, your annual contribution in 2023 will be just $6,500.

If you have never had a TFSA before but were eligible in 2009, your contribution limit will be $88,000; this is because the CRA allows any unused (or withdrawals from previous years) to “roll over”.

If you decide to open more than one TFSA account with different banks or financial institutes, your maximum contribution limit will remain the same for the year.

How do I start saving in a TFSA?

Opening a TFSA is easy and can be done at any bank or financial institution. If you are over the age of 18 (19 in select provinces) and you are living in Canada with a Social Insurance Number, you are eligible for a TFSA.

An investment strategy can go a long way, so we put together some next steps to help get you started:

• Compare TFSA interest rates using our curated list of the best banks and financial institutes you’ll want to do business with this year.
• Having a clear financial goal and using resources like our TFSA growth calculator and our TFSA contribution calculator.
• Open your TFSA with the institute that best fits your goals.
• Distribute your assets into a well-rounded portfolio to maximize your financial security, while maintaining your growth potential (either self-directed or speak with a financial adviser, whichever option feels right for you).

Did you like this article?

Alexandre Desoutter

Alexandre Desoutter has been working as editor-in-chief and head of press relations at HelloSafe since June 2020. A graduate of Sciences Po Grenoble, he worked as a journalist for several years in French media, and continues to collaborate as a as a contributor to several publications.