A Tax Free Savings Account is an excellent savings vehicle. You can now qualify for up to $57,500 in TFSA contribution room (2018), making it more worthwhile to consider using it for a long-term investment strategy.
Financial institutions still promote TFSAs as strictly for savings. There’s nothing wrong with that, although if you have only a few thousand dollars in a savings account you won’t get much of a tax break. However, a TFSA is a good place to hold your emergency funds, savings for a short or medium-term goal, or the current spending bucket of your retirement money.
In this low interest rate environment, it doesn’t hurt to try to eke out some additional return. The following charts show the recent interest rates for High Interest Savings Accounts and Non-Redeemable GICs held in a TFSA.
TFSA Interest rates offered by the five major banks
| HISA | 1 YR | 18 MOS | 2 YR | 3 YR | 4 YR | 5 YR | |
| BMO |
0.6% 2.5% to Apr 3/18 Min. deposit $50 |
0.85 |
0.95 | 1.05 | 1.15 | 1.25 |
1.5 |
| BNS |
1.05% |
1.9* | 2.1* | 1.0 | 1.05 | 1.1 |
2.6* |
| CIBC |
0.7% 2.3% to Mar 31/18 On new deposits Min. deposit $25 |
1.25* |
n/a | 1.05 | 1.55* | 1.1 |
1.8 |
| RBC |
0.85% |
0.9 | 1.05 | 1.25 | 1.35 | 1.5 |
1.6 |
| TD |
0.85% |
1.0 | n/a | 1.25 | 1.35 | 1.5 |
1.6 |
*Special bonus rates
TFSA Interest rates offered by on-line banks
|
HISA |
1 YR | 18 MOS | 2 YR | 3 YR | 4 YR |
5 YR |
|
| Simplii |
1.1% 3% to Feb 28/18 |
1.7* | n/a | 1.3 | 2.0* | 1.5 |
2.25* |
| Tangerine |
1.1% 1.9% for new clients for 6 mos |
2.0 | 2.05 | 2.15 | 2.3 | 2.4 |
2.6 |
| EQ** |
1.05% |
2.1 | n/a | 2.45 | 2.65 | 2.7 |
2.9 |
*Special bonus rates
**TFSA available through EQ’s parent company Equitable Bank
(Interest rates current as of January 28, 2018)
Final thoughts
As you can see, the TFSA interest rates offered by our financial institutions are all over the map. Other offerings include: short-term or cashable GICs, bonus rates for certain odd terms (e.g.14 or 30 months), and special products with names like Laddered GICs and Rate Risers, and some may contain certain restrictions. Your local credit union may have other possibilities for you.
Banking sure isn’t so simple any more.
Take some time to review what’s offered so you can choose the best option for you depending on your savings goals and circumstances.
