Who can open a TFSA?
Any Canadian over the age of 18 who has a valid social insurance number (SIN) is eligible to save or invest in a TFSA.
How do TFSA contributions work?
If you’re asking “What’s the catch?”—well, there isn’t one, unless you count the yearly limit for the amount of money you can deposit into the TFSA. Each year, the federal government announces what the annual maximum contribution is; for 2024, it’s $7,000, and for 2025, it remains $7,000. If you miss a year, or don’t make the maximum contribution, your unused contribution room can be rolled over into future years. So, if you turned 18 before 2009, the first year TFSAs were made available, your current lifetime maximum contribution room is $102,000, as of Jan. 1, 2025. When you withdraw money from your TFSA, that exact amount becomes available to you to contribute again as of the next calendar year. So, let’s say you withdraw $4,000 this year to fund a minor home renovation; next year, you’ll be able to contribute that year’s announced maximum plus the $4,000 you withdrew this year. (For a more precise look at how much you can contribute, enter your digits into our TFSA contribution room calculator.)
Can I have multiple TFSA accounts?
There is no limit to the number of TFSA accounts one person can have, but your total contribution limit remains the same, whether you have one TFSA or six. (As noted above, the lifetime maximum for those who were 18 or older as of 2009 is currently $95,000 as of 2024.) The more accounts you have, the harder it is to keep track of them; there are penalties for overcontribution, too, so you’ll want to ensure you don’t exceed your annual or lifetime limit at any time.
What can I invest in with a TFSA?
You can hold the following qualified investments within a TFSA:
Savings accounts
These are the safest vehicles for investing your money. Since savings accounts are essentially no-risk investments, because they are insured by the Canada Deposit Insurance Corporation (CDIC) or similar provincial bodies (check the details with your financial institution), they tend to pay a low rate of return compared to other investments. You can earn a little more interest with a high-interest savings accounts (HISA).
Guaranteed investment certificates (GICs)
GICs are very safe, low-risk forms of investment with returns that are normally subject to tax at your marginal income tax rate unless they are held within a TFSA. GICs guarantee a rate of return for a fixed period of time, such as a one-year or five-year term. Non-redeemable GICs pay a higher rate of return in exchange for tying your money up for the entire term. If you think you might need to access your money before the end of the term, you can choose to hold cashable/redeemable GICs, which allow you to withdraw some or all of your investment at any time—but know that you’ll earn a lower rate of return with these types of GICs.
Stocks/equities and bonds
Investing in the stock market has the potential to pay a sizeable return on a small investment. However, stocks and bonds are also subject to a high degree of risk. While they can be held within a TFSA, they require both a higher financial aptitude and a higher risk tolerance than other investment options.
Exchange-traded funds (ETFs)
An ETF is a basket of investments that’s usually pegged to follow a particular market index. They can be a mix of different stocks, bonds, commodities or all of the above. They are bought and sold on an exchange, so you need a brokerage account to trade them individually, but they also work well as a complement to automated robo-advisors, such as Wealthsimple and Questwealth, since they are designed to be fairly hands-off. ETFs pay a moderate return for a moderate risk, and because they are not actively managed, they come with relatively low fees. Since ETFs do track the stock market as a whole, they are subject to the volatilities of the market and are better used as long-term investment tools, so your portfolio has a chance to rebound from any losses.