How Does Your TFSA Stack Up Against the Average Canadian at 30?

By Adam Othman at The Motley Fool Canada

The Tax-Free Savings Account (TFSA) has been a blessing for Canadians since its inception in 2009. If you have been eligible to contribute to a TFSA since that time, the cumulative contribution room would be $109,000.

Due to its tax-sheltered status, the returns from any investments held in a TFSA can grow tax-free. You can withdraw funds from the account without incurring taxes, and the Canada Revenue Agency (CRA) adds back the withdrawn amount to your next year’s contribution room.

Yet, Statistics Canada found that Canadians in the 30–34 age range used just $16,760 from their TFSA contribution rooms in 2023, leaving $61,882 completely unused. That is an enormous amount that would have served those Canadians far better, especially at such a critical wealth-building time in their lives.

This gap between available and used contribution room highlights the fact that most Canadians still don’t understand how the TFSA can serve as a powerful investment vehicle. Failing to make the most of your TFSA means losing out on potentially thousands from your retirement nest egg.

Why it’s better to use the contribution room

Suppose you have $61,882 set aside in a high-interest savings account or in Guaranteed Investment Certificates (GICs). These types of investments do not offer returns of more than 3% annually. Even with conservative investments, the amount can return around $1,800 to almost $2,000 per year.

However, using the same amount to invest in high-quality stocks in a TFSA can return far more in the long run. By limiting yourself to holding cash or GICs in the account, you’re sacrificing the potential of compounding to accelerate your tax-free wealth growth, especially over the next few decades.

Generate growth and income

If you seek higher-yielding returns in a TFSA, allocating some of the contribution room to hold high-quality dividend stocks can be an excellent way to get them. To this end, a blue-chip stock like BCE Inc. (TSX:BCE) might be a great investment to consider.

BCE is a $30.2 billion market-cap giant in the Canadian telecom industry. It is one of the three companies that hold the major market share of the Canadian industry. If you want a high-yield dividend stock to boost your passive income and long-term capital gains, BCE can be a good pick.

The company has historically rewarded investors with consistent dividend hikes. Due to rising costs, regulatory pressures, and increasing competition, its management was forced to cut its annualized dividends last year to around half of what it previously offered. Despite slashing its payouts, it offers high-yielding returns that are more sustainable for the underlying company to support.

As of this writing, BCE stock trades at $32.42 per share and pays investors $0.4375 per share each quarter, translating to an annualized dividend yield of 5.4%. Considering that even a high-interest savings account in Canada doesn’t offer these kinds of returns, it should be easy to see why it can be a good investment to consider.

Foolish takeaway

When investing in the stock market, never forget the importance of diversification. Putting all your eggs in one basket is too risky for even the most risk-tolerant investor. Spreading your money across several investments can protect your portfolio from losses in a few of them by offsetting them with gains in others. BCE stock can be an excellent starting point for a TFSA portfolio, but I would advise using it only as a starting point to build a well-balanced collection of investments.

The post How Does Your TFSA Stack Up Against the Average Canadian at 30? appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2026