The Power of Starting Early
Compounding is when your returns generate their own returns. It's powerful at any age, but it's dramatically more powerful when you start young. A 18-year-old who invests $7,000 in a TFSA and never adds another dollar will end up with more money at 65 than a 35-year-old who contributes $7,000 every single year for 30 years.
That's not a typo. The early start wins because of 47 years of compounding vs. 30.
The Contribution Room Advantage
Every year you delay opening a TFSA, you lose a year of contribution room, forever. Room doesn't retroactively build up from when you were eligible. A 25-year-old who never opened a TFSA lost seven years of room they can never get back.
If you're 18 right now, open a TFSA today. Even if you only put in $500, you're starting the clock on your contribution room accumulation.
What Should a Young Person Put In Their TFSA?
If you're 18 and working part-time or just starting your first job, you don't need a complicated investment strategy. Here are two great options:
High-interest savings TFSA: If you're saving for something in the next 1–3 years (a car, travel, school), keep it in a high-interest savings TFSA earning 3.5–4%+ tax-free. No risk, good return.
ETF investment TFSA: If you won't need the money for 5+ years, consider a simple all-in-one ETF like XEQT or VEQT, diversified global equities in a single fund. Open an account at Wealthsimple or Questrade and set up automatic contributions.
The Tax-Free Advantage Over a Lifetime
Here's the math that makes this real. Invest $7,000 at age 18 in a diversified ETF averaging 7% annually:
- At age 30: ~$15,700
- At age 45: ~$61,000
- At age 65: ~$236,000
All of that $229,000 in gains? Tax-free. In a regular account at a 30% tax bracket, you'd net roughly $160,000 instead. The TFSA saved you ~$76,000 in taxes on a single $7,000 contribution made at 18.
Ottawa Tip: Talk to Your Kids
If you're a parent in Ottawa reading this, one of the best financial gifts you can give your child at 18 isn't a car or a vacation. It's opening a TFSA and seeding it with the annual contribution limit. Many Ottawa families are doing exactly this, especially those in the tech and public service sectors who understand compound investing.
Getting Started Takes 10 Minutes
You need: your SIN, a government ID, and a phone or computer. Go to Wealthsimple, EQ Bank, or your current bank. Open the TFSA. Put in whatever you can afford. Then automate a monthly contribution, even $50/month matters.
Your future self will thank you more than you can imagine.
