A Tax-Free Savings Account (TFSA) is a way for you to set money aside tax-free throughout your lifetime. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.  Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible.

You can open a TFSA at your bank, or investment advisor.

Should I Use a TFSA?

Yes, if:

  • You want to create an emergency fund.  You have to apply to get the money out of your TFSA, which is simple to do, but it’s slightly harder than taking cash out of your wallet, so you will be less tempted to use your TFSA for impulse purchases.
    • NOTE: The government limits how much you can contribute each year to your TFSA, so if you are at your lifetime limit and you take money out, you must wait until next year to start contributing again, so a TFSA is not a good way to save for day to day expenses.  See our section on how to Manage your Money for advice on how to manage your monthly expenses.
  • You are saving for a large purchase, like a car or house down payment; your money will earn interest tax free.
  • You are already retired, and don’t have the need to contribute to an RRSP.


Government of Canada website explaining TFSAs