TFSAs: Keep More of Your Hard-Earned Money

numbers money calculating calculation

Taxes are certain to take away from your wealth. After all, it’s one of the only two constants in life. But what if there was a way to avoid paying tax? What if there was a tool that you could use to legally save your taxes on certain things. Well… there is! I present to you: the TFSA!

Read on to discover what exactly a TFSA is, why you should have one, and how to open one right now.

What Are Taxes?

Before we dive into TFSAs, it’s important to understand exactly what taxes are and how they work. Put simply, taxes are money that you need to pay to the government in exchange for the services they provide. What services? Well to name a few: roads, police, healthcare, social workers….. need I go on? In terms of the different kinds of taxes you might have to pay, here are a few:

  • Income tax
  • Sales tax
  • Property tax
  • Capital gains tax
  • Dividend tax

A quick run-down: Income tax is tax you need to pay on salaries and wages you get from your job. Sales tax is tax you need to pay when you buy stuff from anywhere. Property tax is tax you pay for owning property. Capital gains tax is tax you pay when you buy a stock low and sell it high. Dividend tax is tax you pay on dividends received from corporations in which you own a dividend-paying stock in.

Nobody wants to pay tax. Everyone feels like they are taxed too much and as such, people are always trying to find ways to minimize taxes. This is a large part of what accountants do as a living: minimizing taxes. All sorts of levers and tricks are used, such as corporation write-offs, spousal shareholders, and donations to charities. However, there is actually a legal way to save yourself from paying capital gains and dividend tax.

What is a TFSA?

This brings us to the TFSA short for Tax-Free Savings Account. A TFSA allows you to avoid paying tax on any money you make with your investments.

It looks just like any other investment account, and can usually be accessed from the same platform.

TFSA account

This is an actual screenshot from my Wealthsimple Trading account, and as you can see, my TFSA is an option selectable from the same platform as my personal account. In fact, when I buy stocks, often a little bubble will pop up asking “do you want to buy this in your personal account or TFSA?”

In reality, a TFSA is just an investment account which has the added benefit of sheltering you from investment taxes. How? Let’s find out.

How Does a TFSA Work?

Let’s say you buy $1000 of the Apple stock today in your regular brokerage account. Then, after a month, your money has doubled and you decide to take it out when it’s worth $2000. You now have to pay capital gains on the $1000 that you made from the stock. It depends on how much money you made during the year, but on $1000 you could pay up to $270! That’s a huge chunk of your money.

Instead, let’s say you bought the same $1000 of Apple stock at the exact same time but just with a TFSA account. When you take the money out at $2000, you won’t have to pay a dime to the CRA! All that money is yours and you can withdraw whenever you like.

The same goes for dividends. If you hold a dividend-paying stock in a regular account, you’ll be required to pay dividend taxes on whatever money you make from it. If you hold the stock in a TFSA, you don’t need to pay that tax!

The only catch is that you can only contribute a certain amount to your TFSA every year. For 2021, the amount is $6000 and it usually hovers around there. But $6000 tax-free is still better than nothing. Plus, if you miss a year, no worries, you’ll have that contribution room sitting there for the next year!

Saving Tax in Action

crop payroll clerk counting money while sitting at table; tfsa

You might be thinking to yourself “that’s great Jeff, but it’s just a little tax… what harm can it really do?” Well, let’s see using real numbers and savings cases.

Let’s say you open up a regular investing account at the age of 18 (the earliest you can.) Every year onward, you contribute $6000 in hopes of saving for retirement. You then use your money and invest in the general stock market. Historically, the stock market has returned about 10% every year, but let’s be conservative and use 7%.

Here are the stats:

  • $6000 contribution annually
  • 7% compounding interest
  • 47 years (65 years old – 18 years old)

Using a compound calculator, we figure out that the value of the investment is a whopping $2,123,735.66 when you’re 65. Over $2 million dollars! But wait, you didn’t use a TFSA so all of your $2 million is eligible for capital gains tax. You withdraw all the money at once and end up paying $534,000 in capital gains tax.

That’s half a million dollars that you could have saved by using a TFSA. Think about all the things you would do with half a million dollars right now. Still think a TFSA is useless?

How Can a TFSA Help You?

The thing about TFSAs which is different from other tax-deferral accounts is that you can withdraw from your TFSA whenever you want and still have that contribution room for next year. What this means is that if you want to make a purchase, you can take out money from your TFSA without consequence.

So don’t be fooled just because I mentioned a scenario regarding retirement, you can save for ANYTHING with a TFSA. Be it a house or a car or a wedding, you can grow your money tax-free and take it out when you need to make the purchase.

If you are currently invested in equities or are planning to invest but still have contribution room in your TFSA, you are throwing away real hard money by paying unnecessary taxes.

How to Start Saving on Taxes Today

By now, hopefully, you realize the merits of a TFSA and are thinking about how to open one. There are many ways to open up a TFSA account, but definitely do your research beforehand as each one structures fees and commissions differently.

Your Bank

The first one worth mentioning is your bank. If you currently use any major Canadian bank, chances are they have an option for you to open a TFSA account. Personally, I bank with TD and the first TFSA I opened was through them. These are relatively safe and straightforward and you’ll have all your money in one place. However, TD charges a $10 commission fee per transaction, so every time you buy a stock you need to pay $10. I didn’t really feel like it was worth it, so transferred my TFSA account out of TD. If you want to open a TFSA with your bank, simply google “TFSA (bank name)” and there should be detailed instructions.


Next up is Questrade. Questrade is an online brokerage that allows you to buy and sell stocks from all over the world. This was the second TFSA that I opened as my dad uses Questrade a ton. It’s pretty straightforward, but they still charge a commission fee and also have weird hidden margin fees that you need to be aware of. I didn’t do my research and ended up accidentally paying over $200 in margin fees: not a mistake you want to make. If you would like to check out Questrade, head over to this link here.


The third and final platform that I have used and currently hold my TFSA in is Wealthsimple. The real tipping factor for me was that Wealthsimple had an app that you could use. I personally love having everything on my phone. So being able to easily buy and sell stocks, as well as check on my portfolio, with a tap of my fingers was a big selling point. Currently, I haven’t run into too many issues with Wealthsimple but do be aware of their 1.5% conversion rate when you’re buying US stocks. If you’re interested in taking a look, you can check it out here!

Start Growing Your Money Tax-Free Now!

mountain with lush trees under blue cloudy sky in fog

TFSAs are the best legal way to save your money from taxes. A quick recap:

  • There are a lot of different kinds of taxes
  • Some of them are capital gains tax and dividend tax (tax you pay on money made from stocks)
  • By using a TFSA, you don’t need to pay these taxes
  • In the long run, taxes can really add up
  • You can withdraw money whenever you want, so there’s no reason to not use a TFSA right now
  • There are a few different ways to open up a TFSA, but do your research before committing to any platform

So what are you waiting for? Get out there and start contributing to your TFSA (or open one if you don’t have one.) Your rich future self will thank you.


Thanks for reading through “TFSAs: Keep More of Your Hard-Earned Money”. To learn about how to build income opportunities as a student, head over to this post here. If you want to learn more about me, head over to this link here. Also, check out Feedspot for more Personal Finance content! Finally, if you want to get exclusive updates and tips, drop your email in the “get updates” box (might have to scroll up a bit.) Let me know your thoughts and suggestions in the comments!


  1. This is really helpful! I am horrible with finances and am actually considering in investing in an index fund. Thanks for the tips I actually didn’t know some of this. You really break things down in a way that’s easy to comprehend. Great read and keep up the good work!

  2. TFSAs are such an important investment tool for young people to take advantage of. I’m thrilled to see you helping to educate others in your age group.

    I like that you outlined three ways to open a TFSA. They’re the same three that I’d recommend! I hope this post inspires others to take action and start growing their money (tax-free)!

    1. The first time I heard about TFSAs I was like “wait… $6000 a year… tax-free???”
      Very useful tool and definitely glad I found out about it early.
      Thanks for the comment Chrissy!

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