Can I Open a TFSA Account for My Child?

The short answer: it depends on their age. By law, an individual can’t have TFSA until they attain the majority age and can get into a contract. This means that depending on the province or territory, the age at which you can open a TFSA for your child will differ. The table below gives the minimum legal age for opening a TFSA account.

Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, Saskatchewan	18 years or older
British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut and Yukon	19 years or older

This implies that your child can’t have a tax free savings account under 18. One thing to note is that irrespective of the province, the contribution room starts accumulating from the age of 18. Also, the TFSA contribution room carries over to the following year. This means that children not being able to open a TFSA account at 18 years can use the contribution room from the year to be used when they turn 19.

It is always best to start early. Therefore, encourage your child to start when they are eligible. Help them research and choose different options and investments. Use the power of compounding and time to their advantage. Even if they have limited income sources at this age, gift them money to contribute to their TFSA (both provide tax advantages). Encourage them to be in it for the long haul and take a slightly aggressive approach as they have time to recover losses, if any. Positive reinforcement goes a long way in making these habits stick. Talk to them about matching their contribution towards their TFSA.

Here are some of the options that you can help them learn to save and invest before they turn the age of majority:

Advantages of Opening Up a TFSA for Your Child

• TFSA provides your child with a tax-free haven for saving and growing their investments. The earnings and withdrawals are tax-free, thereby making these excellent investing vehicles.
• Different TFSA options such as Savings Accounts, Stocks, Bonds, Mutual Funds, and Exchange Traded Funds provide for a great learning opportunity for your child to understand different financial products.
• Through the power of compounding and time, teenagers and young adults can beat inflation to kick-start their journey toward economic prosperity.
• The unused contribution room carries over to the following year.
• Withdrawals from TFSA aren’t counted as income and don’t have to be reported to CRA. This implies no impact on eligibility for Government Benefits.

Disadvantages of a TFSA for Children

• If your teenage child or young adult is earning any income, contributing to TFSA doesn’t help with lowering their taxable income.
• Your child will have to track contribution limit and their investments. It may be overwhelming for them, so you may have to take a more hands-on approach.