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Frequently Asked Questions About HISAs, TFSAs, FHSAs and GICs

Woman reviewing her savings and investments in her Saven Financial account.

Are you ready to unlock the secrets of smart saving and investing? At Saven Financial, we're your guide through the maze of savings accounts. We're here to demystify four powerful tools: High-Interest Savings Accounts (HISAs), Tax-Free Savings Accounts (TFSAs), First Home Savings Accounts (FHSAs), and Guaranteed Investment Certificates (GICs). Let's start your journey to financial success!

Each tool has unique benefits and can play a different role in your financial strategy. Whether saving for a rainy day, a dream vacation, your first home, or your retirement, the right choice can significantly affect how quickly your money grows.

We'll discuss each option in detail so you can decide where to put your hard-earned cash. By the end, you'll be well on your way to becoming a savings superstar!

High-Interest Savings Accounts (HISAs)

What is a HISA?

Think of a High-Interest Savings Account (HISA) as your regular savings account's super-powered cousin. It's designed to help your money grow faster by offering a significantly higher interest rate than traditional savings accounts. That means you earn more on your balance without lifting a finger!

Why choose a HISA?

  • Higher interest rates: Earn more interest on your savings, helping your money grow faster.

  • Easy access to your funds: Unlike some investments, you can usually withdraw money from your HISA whenever you need it without penalty. funds.

  • Safety and security: The Financial Services Regulatory Authority of Ontario (FSRA) protects your deposits up to the maximum coverage limit, giving you peace of mind.

Are HISAs safe?

Yes, your money in a HISA is as safe as in a regular savings account. Saven Financial is a division of FirstOntario Credit Union, and your deposits are protected by FSRA’s deposit insurance up to the maximum coverage limit. This means your savings are secure, so you can rest knowing your money is working hard for you.

When is a HISA the right choice?

HISAs are ideal if you:

  • Want a higher return on your savings than a regular savings account offers.

  • Need easy access to your money for emergencies or planned expenses.

  • Prefer a low-risk savings option.

If this sounds like you, a HISA could be the perfect way to supercharge your savings!

Tax-Free Savings Accounts (TFSAs)

What is a TFSA?

Imagine a savings account where your money grows and grows, and you never have to pay taxes on those gains. That's the magic of a Tax-Free Savings Account (TFSA)! It's a powerful tool designed to help Canadians save for their goals, big or small while keeping more of their hard-earned money.

The key benefit of a TFSA is its tax-free growth. Interest, dividends, or capital gains you earn within your TFSA are yours to keep – the government won't take a slice! However, there are annual contribution limits, which change over time. For 2024, the limit is $7,000, but you can carry forward any unused contribution room from previous years.

Who is eligible for a TFSA?

If you're a Canadian resident aged 18 or older with a valid Social Insurance Number (SIN), you can open a TFSA and start saving tax-free!

What can I invest in with a TFSA?

The great thing about TFSAs is their flexibility. You can hold various investments within your TFSA, including:

  • Guaranteed Investment Certificates (GICs): These offer a low-risk option with guaranteed returns.

  • Stocks: Invest in individual companies and potentially earn higher returns but with higher risk.

  • Mutual funds: Diversify your investments by pooling your money with other investors.

  • Exchange-Traded Funds (ETFs): Similar to mutual funds but traded on the stock exchange.

  • Bonds: Loan money to governments or corporations in exchange for regular interest payments.

Remember, choosing suitable investments depends on your risk tolerance and financial goals. It's always wise to research or seek advice from a financial professional.

Can I withdraw from my TFSA?

Absolutely! One of the biggest perks of a TFSA is the flexibility to withdraw your money whenever you need it without paying any taxes. Plus, the amount you withdraw gets added back to your contribution room the following year, so you can re-contribute if you wish.

First Home Savings Accounts (FHSAs)

What is an FHSA?

Dreaming of owning your first home? A First Home Savings Account (FHSA) could be your secret weapon! It's a new registered savings account introduced by the Canadian government, specifically designed to help first-time homebuyers like you save for a down payment.

Think of it as a turbocharged savings account with a dual benefit:

  1. Tax-deductible contributions: You can deduct your FHSA contributions from your taxable income, lowering your annual tax bill.

  2. Tax-free investment growth: Any investment gains within your FHSA grow tax-free like a TFSA.

It's the best of both worlds, accelerating your savings while giving you a tax break!

Am I eligible for an FHSA?

To qualify for an FHSA, you must meet the following criteria:

  • Be a Canadian resident aged 18 or older.

  • Have not owned a home in the current calendar year or the previous four calendar years.

  • Have a written agreement to buy or build a qualifying home in Canada before October 1 of the year after you withdraw the funds from your FHSA.

The annual contribution limit for an FHSA is $8,000, with a lifetime limit of $40,000.

How do I withdraw from an FHSA for a home purchase?

When you're ready to buy your home, you can withdraw funds from your FHSA tax-free. Here's how it works:

  • You must be a first-time homebuyer.

  • You must have a written agreement to buy or build a qualifying home in Canada.

  • The withdrawal must be made within 30 days of owning the home.

You can combine your FHSA withdrawals with an HBP withdrawal from your RRSP for an even larger down payment.

Guaranteed Investment Certificates (GICs)

What is a GIC?

Imagine planting a money tree where you know how much fruit it will bear. That's the idea behind a Guaranteed Investment Certificate (GIC). It's a simple and secure investment that offers a guaranteed rate of return over a fixed period, making it a popular choice for those seeking stability and predictable growth.

When you invest in a GIC, you're lending money to a financial institution for a set term (e.g., one year or five years). In return, the institution pays you a fixed interest rate on your investment. When the term ends, you get your original investment back, plus the interest you've earned. It's like having a financial safety net!

What are the different types of GICs?

GICs come in various flavours to suit different needs:

  • Redeemable GICs: These offer flexibility, allowing you to withdraw your money before the term ends, usually with a lower interest rate.

  • Non-redeemable GICs: These lock in your investment for the entire term and typically provide a higher interest rate than cashable GICs.

  • Escalating rate GICs: These start with a lower interest rate that increases over time, rewarding you for staying invested longer.

How do I choose the right GIC term?

Choosing the right GIC term depends on your financial goals and how long you're comfortable investing your money. Generally, longer terms offer higher interest rates but lock in your money for extended periods.

Here's a quick guide to help you decide:

  • Short-term GICs (1-3 years): Ideal for short-term goals or to keep your options open.

  • Mid-term GICs (4-6 years): A good balance of decent returns and moderate access to your funds.

  • Long-term GICs (7+ years): Offer the highest potential returns, but your money is tied up for longer.

More Questions? We've Got Answers!

Choosing the right savings and investment options can raise a few questions. Here are some common queries we often hear:

Do HISAs, TFSAs, FHSAs, and GICs have any fees?

At Saven Financial, we believe in transparency and keeping things simple. Our HISAs, TFSAs, and FHSAs have no monthly fees, so you can focus on growing your money. GICs generally don't have fees either, if you hold them until maturity. However, it's always wise to double-check the specific terms of each product.

How are HISAs, TFSAs, and FHSAs taxed?

  • HISAs: Interest earned in a HISA is taxable as income.

  • TFSAs: Any growth or income within your TFSA is tax-free, both while it's invested and when you withdraw it.

  • FHSAs: Your contributions are tax-deductible, meaning they lower your taxable income for the year. Investment growth within the FHSA is tax-free, and you can withdraw your savings tax-free to buy a qualifying home.

How can I maximize my savings with these different options?

Consider combining HISAs, TFSAs, and GICs to create a balanced savings strategy. A HISA is excellent for short-term savings and emergency funds, while a TFSA can help you save for long-term goals like retirement or a down payment on a home. GICs offer a secure way to secure a guaranteed return for a specific period.

Still have questions?

Our knowledgeable team at Saven Financial is always here to help! We're happy to answer any questions about HISAs, TFSAs, FHSAs, GICs, or any other aspect of saving and investing.

Your financial well-being is our priority. Let's chat and discover the best path to reach your goals together.

Your Financial Journey Starts Here

As we've explored, High-Interest Savings Accounts (HISAs), Tax-Free Savings Accounts (TFSAs), First Home Savings Accounts (FHSAs), and Guaranteed Investment Certificates (GICs) are powerful tools to help you save for your dreams and secure your financial future.

Whether you're looking to earn more on your everyday savings with a HISA, grow your investments tax-free with a TFSA, get a head start on buying your first home with an FHSA, or enjoy the security of guaranteed returns with a GIC, there's an option out there that's perfect for you.

Remember, the key is understanding how each tool works and choosing the right combination to match your unique financial goals and risk tolerance.

Ready to Take the Next Step?

At Saven Financial, we're passionate about empowering you on your financial journey. We offer HISAs, TFSAs, FHSAs, and GICs with consistently competitive rates and flexible terms to meet your needs. Join us today, and let's build a brighter financial future together!

Stay ahead with SavenSmarts!