When we say 'Savings Account', does it automatically mean that the interest rate can go up and down? So by that definition, the interest rate on TFSA can go up and down any time?

2 Answers 2


TFSA is a misnomer. It is not a Savings Account, but a registered Savings Plan. For example, My TFSA is in mutual funds, so there is no interest as such. I make my earnings through share value growth, and dividends. If you want a guaranteed return, then you put it in GICs.

You can put TFSA funds in a savings account (which is essentially keeping it in cash), in which case the rate would fluctuate just like your regular savings account.

However, I believe the best strategy is RRSPs should be stable and secure, and TFSA's should be higher risk/higher reward, giving you the tax free benefit on the bulk of your earnings.

  • Good points about TFSA. Not sure I agree with the RRSP vs TFSA investment advice, though. It fully depends on time horizon, but most people agree on using the RRSP for foreign dividend and all interest-bearing investments, non-registered for Canadian dividends and capital gains, and anything in a TFSA except for foreign dividends/interest. This advice is simply for tax efficiency, and should be used as a framework for someone planning how best to allocate their money with respect to their time horizon.
    – fideli
    Commented Apr 9, 2011 at 0:22
  • My argument is based solely on growth potential. The benefit of an RRSP is immediate tax savings and you are punished on withdrawal. The benefit of a TFSA is no tax on growth. So, with a 50-50 mix of secure, low interest, and high risk high reward instruments, I want the majority of my reward in the TFSA where it is never taxed. Commented Apr 9, 2011 at 15:21
  • Agreed in principle. Just ensure that the growth in your TFSA doesn't include foreign dividends, or else they'll have a 15% or more of withholding tax that you won't be able to get back. Also, not to grouse too much, but how does this answer the question given that @Kaushik was asking about fluctuating interest rates?
    – fideli
    Commented Apr 13, 2011 at 5:20
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    It was ancillary to the first paragraph. It sounded like he was going to hold his TFSA in cash, which is the second worst thing you can do with it. (Although, if all you have is 5k and it's also your emergency fund, then a TFSA in a cash account is a sensible option.) Commented Apr 13, 2011 at 15:13

In general, when we say savings account, yes the interest can go up or down at anytime. Some savings accounts link it to the Prime Rate explicitly, others change the interest paid every now and then, usually in response to changes in Prime Rate.

When you say TFSA, as chris alluded to, you must be talking about a TFSA savings account. The interest rate on that account then varies in the exact same way as a non-TFSA savings account.

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