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What is a TFSA GIC?

January 5, 2024
min read

By opening a TFSA GIC, you can take advantage of today’s high interest rates and pay less in taxes!

Guaranteed Investment Certificates (GICs) are perfect for those who want to grow their savings without worrying about market volatility. You can trust that the money you invest and the interest rate you’ll earn are guaranteed.

But GICs come with one drawback: The interest you earn is subject to tax.

With a TFSA GIC, you can grow your savings tax-free. In this article, we’re answering the most common questions about TFSA GICs:

What is a TFSA?

A Tax-Free Savings Account allows you to grow your savings without paying taxes on any interest you earn.

You can use your TFSA for long-term or short-term savings goals. It can also be used to supplement your RRSP savings.

Before the year ends, you’re probably rushing to get in your last-minute TFSA contributions! Don’t worry: Your unused TFSA contribution room will carry forward to 2024.

There is an advantage to contributing early. By maxing out your TFSA at the start of the year, you can earn more interest on your savings!

What is a GIC?

A Guaranteed Investment Certificate is a way to grow your savings within a defined period and earn a fixed interest rate. Here’s how it works:

  • You deposit a set amount of money into your GIC.
  • You select the term you’d like to keep the money invested for. With Achieva, you can choose from 1 to 5-year GIC terms. Note: You can’t withdraw the money until the term ends and your GIC matures.
  • Your money will earn a fixed interest rate throughout the term.
  • At the end of the term, you’ll receive your principal and the interest you’ve earned.

What are the benefits of a GIC?

Why should you choose a GIC investment? With this account, you can:

  • Earn a guaranteed interest rate.
  • Protect your investment from the volatility of the market.
  • Avoid temptation to spend your savings - because your money is locked in your GIC!

It’s important to remember that once you’ve invested your money in a GIC, you won’t be able to access the money until the term ends. You only get paid at maturity, so make sure to leave yourself with enough savings outside of your GIC.

What is a GIC TFSA?

A TFSA is a type of savings account.

A GIC is a type of investment.

So, you might be wondering: Can I buy a GIC in my TFSA?

You can! The minimum balance required to open a TFSA GIC is $1,000.

A TFSA GIC allows you to take full advantage of the tax benefits that a TFSA offers, while earning the guaranteed interest rate that a GIC offers!

Here’s an example:
If you invest $1,000 in a 1-year GIC, earning an interest rate of 5%, all the interest you earn will be subject to tax. You’ll have to claim it as income on your annual tax return.

But if you invest that same $1,000 in a 1-year TFSA GIC, then you will still earn 5% interest and you won’t pay taxes on it.

If you’re thinking about opening a TFSA GIC, be mindful of your contribution limits. Overcontributing to your TFSA can incur a penalty. You can view the contribution limits on the CRA website.

What happens when a TFSA GIC matures?

When your term is up, you have a few options:

  • Reinvest your GIC into a new term. If you don’t need to use the funds right away, you can keep them invested in another GIC to earn even more interest.
  • Cash out your GIC. You can use the money to pay off debt or fund a major expense. Achieva will deposit your funds directly to your savings account once your GIC matures.

The benefits of a TFSA GIC

Here are some of the main reasons why you should consider opening this account:

Earn compound interest throughout the year

With Achieva, interest is calculated daily and paid monthly. That allows you to maximize your returns! Learn more about how our interest rates are calculated.

Your money is safe with us

Thanks to the Deposit Guarantee Corporation of Manitoba, any deposits you make with Achieva are guaranteed without limit. You can enjoy peace of mind knowing your savings are safe and sound.

Pay less taxes, keep more of your earnings

The income you earn through a regular GIC is subject to tax – and a significant amount at that. By keeping your money in a TFSA GIC instead, you’ll keep more of your money and pay less in taxes.

You can set up GIC laddering

The GIC ladder strategy allows you to continually take advantage of the highest interest rates – while still ensuring you have funds available as you need them.

How to buy a GIC in your TFSA

Whether you are a current Achieva customer or not, we can help you take advantage of the tax benefits a TFSA GIC offers. The first step is to contact us, and we can help you get started.

You can grow your savings faster with Achieva—our rates are among the highest of any financial institution in Canada. Check out our GIC rates!

Want to Discuss with an Advisor?

We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.

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