The best TFSAs in Canada for 2022

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As the name suggests, tax-free savings accounts (TFSAs) offer a tax break on contribution income—meaning that, unlike with a regular savings account or non-registered investment account, what you earn inside your TFSA isn’t taxed, even when you make a withdrawal. TFSAs are flexible, too, allowing you to hold cash , g uaranteed investment certificates ( GICs ) , stocks, bonds, exchange-traded funds (ETFs) or mutual funds, so you can tailor your account to different financial strategies and goals. The TFSA contribution limit for 2021 is $6,000, but keep in mind that if you qualified to make a contribution in 2020, but didn’t that contribution room is still available to you. For those who turned 18 in the year 2009 or prior, the lifetime contribution limit is $75,500.

Watch: What is a TFSA

The best TFSA accounts in Canada for 2022

Read on to learn the basics about TFSAs and browse the best TFSA rates and accounts for Canadians to determine which account suits your needs best. These accounts have been listed based on their individual rates of return, security and other benefits.

• Best TFSA account: EQ Bank TFSA Savings Account* (1.25%)
• Best robo advisors: Questwealth Portfolios*; Wealthsimple Invest*
• Best for trading stocks and ETFs: Questrade*;  Wealthsimple Trade*
• Best for mutual funds: Qtrade*
• Best for interest rates: CIBC

Best TFSA savings account:

EQ Bank TFSA Savings Account*

EQ Bank offers a TFSA savings account that holds different types of investments with a 1.25% return—currently the highest regular interest rate on any savings account in Canada, and even managing to beat out the limited-time promotional offers by the big banks. With this account, there are no fees on withdrawals or deposits. Not only will your savings grow faster without fees, but as with any other TFSA, the gains won’t be taxed. That makes this a really safe way to save conservatively. Note that with EQ Bank, you can only have one TFSA account open at a time and hold a maximum of $200,000 in your account. 

EQ Bank is a subsidiary of Equitable Bank, which was established in 1970 and is Canada’s ninth-largest bank, with billions of dollars under management. This TFSA, like all of EQ Bank’s accounts, is CDIC-insured, meaning that your funds up to $100,000 are federally protected. EQ Bank is not available to residents of Quebec.

• Interest rate: 1.25%
• Minimum balance: None
• Withdrawals: Free
• Insurance: CDIC

Open an EQ Bank TFSA Savings Account*

Honourable mentions:

Bank Interest rate Insurance Steinbach Credit Union 1.35% DGCM Alterna Bank 0.90% CDIC motusbank 1.25% CDIC

Alterna Bank TFSA eSavings Account

For those comfortable doing their banking online, what Alterna lacks in brick-and-mortar branches, it makes up for with an above-average 0.90% interest rate. With no fees, no minimum investment, and simple “me-to-me” transfers that allow deposits whenever there’s a bit of extra cash around, this TFSA makes it easy for students to sock away savings. Because the account is CDIC-insured up to $100,000, you can sleep well knowing your principal remains safe.

motusbank TFSA Savings Account

If you’re unfamiliar with this institution’s name, don’t let that get in the way of you banking with them. Although motusbank is a relative newcomer in the list of Canadian online banks, it’s owned and operated by Meridian Credit Union, which has been around for 75 years.

With a regular interest rate of 1.25%, the motusbank TFSA Savings Account offers a high rate of return and zero risk. There is no minimum balance, no monthly fees and deposits are insured by CDIC up to $100,000. (Note: motusbank accounts are not available for residents of Quebec.)

If the stock market climbs and your money’s not invested in it, your portfolio may miss out on all those gains. If you aren’t reliant on income-earning investments and have the stomach to tolerate the stock market’s turbulence, robo advisors and online brokerages make great investment tools.

Best robo-advisors for simplified TFSA investing:

Questwealth Portfolios*

Investing can be intimidating. If you want to grow your money without having to worry about buying and selling individual stocks and ETFs, a robo-advisor can help. When you sign up for Questrade, you’ll complete a short questionnaire that measures your risk tolerance and investing interests, such as whether you want socially responsible investments (SRIs). For example, the most conservative portfolio has 80% allocated to fixed-income and cash investments. Your principal is not protected as it would be within a GIC or a savings account, but it’s automatically rebalanced to retain diversification with market changes. Other portfolios can be more aggressive with higher risk, but also come with the possibility of higher returns. Once you choose your portfolio, Questwealth does the rest.

Robo-advisors charge much lower management fees than traditional brokerages, and Questwealth is one of the most affordable at 0.25% (on balances of $1,000 to $99,999) to 0.20% (for a balance of $100,000 or more). This means you keep more of the stock market gains in your pocket. As with any investment, if your stocks fall, so will your balance. 

Get more information about Questwealth Portfolios*

Wealthsimple Invest*

Like other robo-advisors, Wealthsimple offers a streamlined and automatic way to invest without prior investing expertise, but it stands out for its super-sleek and easy-to-use interface. Wealthsimple Invest* uses Nobel Prize-winning research to power its low-fee portfolios and passive investing principles. Both rebalance and dividend reinvestment are automated and with the round-up feature, you can invest spare change left over from your everyday spending. Wealthsimple portfolios cover three broad risk levels—conservative, balance and growth—and they offer socially responsible and halal investing options. ( Read for more on halal investing. ) Wealthsimple Invest’s * management fees start at 0.5% for deposits of $100,000 or less, and go down to 0.4% on deposits of more than $100,000. 

Get more information about Wealthsimple Invest*

Best for trading stocks and ETFs tax-free:

Questrade*

If you’re comfortable trading individual stocks and ETFs on your own, Questrade (not to be confused with the robo-advisor Questwealth) is a low-fee online brokerage that can empower you to do just that. Questrade accounts can be opened for as little as $1,000. There are no fees for purchasing ETFs and buying/selling stocks has a very low commission at just $0.01 per share (or a minimum of $4.95 up to a max of $9.95). This compares very favourably to the flat $9.95 per trade many other online brokerages will bill you. Questrade charges no annual or quarterly admin fees and no low activity fees. 

Get more information about Questrade*

Wealthsimple Trade*

Weathsimple Trade is the online brokerage of Wealthsimple, and it allows you to trade individual ETFs and stocks on your own in a registered TFSA. The biggest selling point is that there are no commissions on trades. It’s a game changing feature—you won’t owe trading fees when buying or selling shares. However, unlike some other brokerages, such as Questrade, you will have to pay a foreign exchange fee when trading American equities. Plus, Wealthsimple Trade* doesn’t let you trade mutual funds or lacks any analytics features. If you want to take investing into your own hands, Wealthsimple Trade* is an easy and affordable option, but know that it is a mobile-only platform. (See our full review of Wealthsimple’s financial products.)

Open a Wealthsimple Trade account*

Best for trading mutual funds tax-free:

Qtrade*

Qtrade* has been recognized for its outstanding customer service, investing tools and analytics. But it also stands out because it lets you purchase mutual funds for free. Neither Questrade nor Wealthsimple Trade* offer this complimentary service. However, the commission on ETF and stock trades is slightly pricier at $8.75 per trade for most investors, and there is a $25 quarterly administrative fee. Although both can be waived depending on your age and investment activity. While we at MoneySense are big advocates of ETF trading, if you’re first and foremost interested in mutual funds, Qtrade is the way to go.

A note-worthy perk: When new and existing clients open a new Qtrade account and deposit/transfer at least $15,000 in assets (by March, 2022), they can earn up to $2,000 cash back.

Get more information about Qtrade*

Best for interest rates:

CIBC TFSA Tax Advantage Savings Account

There are more perks to this account than just the security of investing with a big brick-and-mortar bank. You can start your TFSA with as little as $25, plus you pay no account fees (aside from potential transfer fees) and you can easily set up automatic contributions. However, its biggest perk is the interest rate: You’ll earn a competitive rate of 1.50% interest on new deposits up until March 31, 2022.

What exactly is a tax-free savings account?

A TFSA is an investment account that’s sponsored by the government. If you’re a Canadian over the age of 18, you’re eligible to save or invest in a TFSA up to a certain amount annually ($6,000 for 2021), and unused contribution room can be rolled over into future years. A TFSA is a tax shelter; it gives every Canadian of the age of majority some savings or investment room to earn, tax-free.

Some confusion arises from the fact that, despite the name, not every TFSA is a traditional savings account. While you can put cash money into a high-interest savings account  or other savings vehicle within a TFSA, it can also hold investments like stocks or bonds, mutual funds, GICs  or ETFs . In this way, a TFSA is similar to a registered retirement savings plan (RRSP), with the exception that with the TFSA you do not pay tax on the earnings after you make a withdrawal. On the other hand, where you can claim RRSP contributions as deductible on your income tax return, that perk isn’t applicable to TFSA contributions.

TFSAs are incredibly flexible. So, you can use them to save for retirement (handy if you’ve used all your available RRSP contribution room), but also for a car, a wedding, a vacation or something else entirely. Purchase the TFSA product of your choice when you register for the account, and let it earn and grow. When you’ve accumulated the amount you want, you’re free to withdraw it, without penalty and without paying tax.

Let’s break this down: If you invested $1,000 in a TFSA and that money grew to $5,000, you would have earned $4,000 tax-free. After you make any withdrawal, you regain that exact amount of contribution room inside your TFSA, up to your lifetime limit.

For retirees, or others whose benefits may be clawed back if their income exceeds a certain level, there’s an additional bonus: Money withdrawn from a TFSA does not count as income, so it will not negatively affect Canada Pension Plan payments or other income-tied benefits.

It’s one of the most beneficial and flexible financial products available, and without cost as long as you stay within your contribution limits (over-payments will incur a 1% per month charge on the excess).

What is the TFSA limit?

The TFSA contribution limit is the maximum amount you are able to hold in your TFSAs, without penalty. (If you contribute more, you will be taxed equal to 1% monthly of the highest excess TFSA amount in the month, until you take it out of the account.) For 2021, if you have never before deposited money into a TFSA, this limit is $75,500. If you have previously contributed, you can calculate your lifetime contribution by subtracting from this limit. Any income earned on the account is not counted toward the limit. See below to find out the contribution limit for each year, including 2021. 

When did the TFSA program start in Canada?

The TFSA was introduced by Canadian Minister of Finance Jim Flaherty in 2008, as part of the 2009 federal budget. The program went into effect on January 1, 2009, when individuals 18 years of age or older, with a valid social insurance number, could begin making contributions. The program’s original intent was to help Canadians save for a new car, renovate a house, start a small business or take a family vacation. But since the launch, it has grown into a way to save for a wide variety of reasons, including longer-term financial goals, like retirement. As of 2021, an estimated 15 million Canadians have a TFSA.

Should I use a TFSA or an RRSP?

The main difference between a TFSA and an RRSP is how they are taxed. This means that when you withdraw money from a TFSA, you are not taxed. With RRSPs, the money is taxed on withdrawal. 

With this in mind, you might be wondering why anyone would choose an RRSP. The answer lies, again, in the tax structure. When you put money into a TFSA, you do not receive a tax credit. But you do with an RRSP, and when you use it correctly, this credit can be a powerful tool. If, for example, you earn enough money to just break into a higher tax bracket, you could contribute to an RRSP and get an exemption that would bring you back into a lower bracket. Very likely, you’ll be in a lower tax bracket when you need to withdraw those RRSP funds in retirement, resulting in a lower lifetime tax bill.

As with all things investing, it’s usually a good idea to diversify. Both TFSAs and RRSPs have their uses as investment products.

Can you have more than one TFSA?

Yes, you can have more than one TFSA. But it’s important to note that in the government’s eyes, it’s like one account, in that your TFSA contribution room doesn’t change. The TFSA limit is the limit. That said, it can be a good idea to diversify your TFSA, like you would with your other investments. You can use one TFSA like a savings account and keep the money accessible and liquid as “cash.” And you can use another TFSA for investments, like GICs, stocks, ETFs or other types of investments. One caveat, though: Avoid withdrawing money from one TFSA to deposit to another. Instead, let the institution transfer the funds for you, so you don’t accidentally make a deposit that could count toward reducing your contribution room. 

How do you open a second or third TFSA? It’s the same process as opening your first TFSA. At a minimum, you’ll need to supply your social insurance number and date of birth, but you may also be asked for supporting documents, such as a birth certificate and tax return. Many TFSA products can be opened online. You simply identify the TFSA product you want—like a savings account, GIC or fund—and apply at the financial institution that offers it. 

Which type of TFSA is right for me?

The very best TFSA for your particular needs will depend on some factors, including our savings goals, your timeline and your appetite for risk. Some TFSA savings accounts  (as opposed to mutual funds, for example) offer strong promotional introductory rates which might help kick-start an account, but in general they’re best for risk-averse investors trying to reach medium- to long-term goals. Your personal comfort with risk will inform the type of TFSAs you invest in. TFSAs in the stock market  are inherently riskier than GICs , for example, and may require substantial trading knowledge. Other factors to consider include whether there are any fees or account charges.

Compare the Best Savings Accounts in Canada*

‡MoneySense.ca and Ratehub.ca are both owned by parent company Ratehub Inc. We may be partnered with some financial institutions, but this does not influence the Best Canadian Tax-Free Savings Accounts in 2021 rankings. You can read more about this in our Editorial Code of Conduct.

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