EASY MONEY Uncategorized

Why it pays to invest in a TFSA

TL;DR: If you were to invest consistently for 40 years within a TFSA, you’d end up with 49% more money than if you’d invested the same amount with a non-registered account.*
*Assuming a 5% annual interest rate and marginal tax rate of 32.17%


In 2009, something wonderful was born: The Tax-Free Savings Account (TFSA). Unlike non-registered accounts, you don’t pay any tax on the investment return, even after you withdraw the funds held in your TFSA. 

These tax benefits make TFSAs the smartest way for Canadians to invest, which is why we were thrilled to offer them to our users through Mylo Advantage. We were even more thrilled to see that 9 out of 10 new Advantage users immediately open a TFSA for their goals.

Unfortunately, only around 40% of Canadian millennials have a TFSA. That’s more than half of Canadian millennials who are missing out on the opportunity to see a much higher net return on their investments.

We crunched the numbers to demonstrate that a Canadian who invests consistently from the ages of 25 to 65 could end up with nearly 50% more money by investing within a TFSA than with a non-registered account.

What does this mean? Let’s break it down.

Say you begin investing $5,000 a year with a TFSA when you’re 25, and continue putting in the same amount every year until you’re 65. 

After 40 years, your net total TFSA return would be $435,959 (assuming an annual interest rate of 5%*).

However, if you were to have made the exact same investment over the same period of time in a non-registered account, your net total return after 40 years would only be $227,023 (assuming a marginal tax rate of 32.17%*).

You’d end up with 48.36% more money (that’s over $200K more!) with a TFSA than with a non-registered account. 


*Marginal tax rate calculated using the average income of Canadians in this age range, and the average marginal tax rate of all provinces.
*Model assumes that the TFSA program will continue to be offered during the entire period.

Click to view the full spreadsheet

As the data shows, the valuable tax benefits of a TFSA, plus time and compound interest, make for a lucrative combination. So if you’ve been thinking about opening a TFSA, make today the day. 

Luckily, Mylo makes it easy to get started. Just create an account, choose a TFSA for your goal and start saving and investing towards it in the smartest way possible.

Need help deciding between investing in a TFSA or an RRSP? This will help

For more information on TFSAs, click here.

If you have any questions or would like to talk with a human, simply email one of our dedicated portfolio managers at support@mylo.ai

Jean-François Goyette, CFA

Jean-François is a Chartered Financial Analyst and a Portfolio Manager for Mylo users with Tactex Asset Management, a wholly owned subsidiary of Mylo Financial Technologies.