For many wealthy Canadian families, TFSAs are often neglected, overshadowed by corporations, trusts, and holding companies, but they should not be. Properly used, TFSAs are powerful tools for tax-free growth and long-term wealth transfer across generations.

TFSA Basics: Small Account, Big Privileges

Despite being introduced January 1, 2009, TFSA are still not part of the average Canadian’s lexicon. And if they are, they are sometimes viewed as just being another savings account. A TFSA is a tax-free investment account that can hold stocks, bonds, ETFs, alternative funds, and more. Meaning all growth/returns inside the TFSA (such as interest income, dividends, and capital gains) grow tax-free and better, can be withdrawn tax free!!!!

As of 2026, the annual TFSA contribution limit is $7,000, and the cumulative room for someone eligible since 2009 and who has never contributed is $109,000. This amount may seem modest relative to a high-net-worth balance sheet, but when fully invested and allowed to compound tax free for decades, the value becomes extremely meaningful. Don’t believe me, have Alex review your MyGPS or Compass Financial plan and look at the balance in your TFSA at age 95 (which is the age our software assumes you live to… if only we could be so lucky!).

The last thing about the TFSA that needs to be mentioned is around estate planning. As Jim famously says in all of our reviews, “The only things to transfer tax-free at death are your principle residence, life insurance proceeds, and your TFSA.”

Why Annual Contributions Matter

For many families, cash flow is not the barrier to TFSA contributions, organization is. Missing a year of TFSA contributions means permanently losing a year of tax-free compounding potential inside a very privileged tax shelter. Yes you can always play catch up and allocate money to those years you missed, but missing a year is a loss opportunity. Building the habit of maximizing your TFSA contribution each January ensures you and your family members are using all available tax-free space before allocating additional funds to taxable accounts.

Across a couple and two or three adult children, fully funding each TFSA annually can shift tens of thousands of dollars into tax-free growth every year. Over time, this coordinated family approach can meaningfully reduce the family’s overall tax drag, especially when compared with holding the same investments in non-registered accounts.

So, if you want to act on meeting these TFSA contributions, let us help you set-up pre-authorized deposits or contributions into your TFSA. We need your permission to move money from your bank account or other investment accounts (e.g. your non-registered account to your TFSA). So, let’s automate this process as best we can to help you avoid from missing out.

How TFSAs Can Help Educate and Prepare the Next Generation.

For parents of young adults, the TFSA offers a powerful opportunity to combine financial education with tax-efficient wealth transfer. Once a child turns 18 and becomes TFSA-eligible, parents can gift funds to help them contribute to their own TFSA without triggering income attribution rules. This means the adult child becomes the sole account owner, creating an ideal setting to teach financial literacy and investment management while strategically shifting capital out of the family estate. We have set up multiple TFSA for children and grandchildren of our clients, helping achieve this objective. We link the TFSA with a saving/investment strategy to support financial literacy and teach some of these valuable skills.  

Summary:

1. Tax-Efficient Wealth Transfer:
   • When parents gift cash to an adult child (18+), future income and gains on those assets are taxed in the child’s hands. Inside a TFSA, all growth remains tax-free, effectively moving capital out of the parents’ future estate in a tax-sheltered manner.
   • Over time, this strategy allows high-net-worth families to accumulate a pool of tax-free assets in the child’s name, which can later support housing, education, entrepreneurship, or early financial independence.
2. A Real-World Financial Classroom:
   • As legal owners of their TFSAs, young adults gain hands-on experience making investment decisions, managing risk, and planning withdrawals. Parents can guide these choices while aligning them with family values and long-term goals.
   • This approach fosters responsibility: children learn to balance growth with liquidity, understand market dynamics, and appreciate the impact of compounding—all within a low-risk, tax-advantaged framework.
3. Flexibility and Control:
   • Unlike locked-in accounts (e.g., RESPs), TFSAs allow contributions to be withdrawn at any time for any purpose, offering flexibility for evolving priorities.
   • Parents can scale contributions annually (up to the TFSA limit) to match the child’s financial readiness and educational progress.

So don’t forget about your TFSA. It’s many benefits are too much to look past. Let us know if you’d like us to make a contribution for you, or put you on a routine, pre-authorized contribution plan so you avoid missing out in the future.