Personal Finance

Daughter just turned 18. I have $2000 for her. I opened a TFSA and a RRSP in her name with trading functionality

  • Last Updated:
  • Feb 25th, 2021 10:27 pm
[OP]
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Nov 9, 2006
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Daughter just turned 18. I have $2000 for her. I opened a TFSA and a RRSP in her name with trading functionality

Daughter just turned 18. I have $2000 for her. I opened a TFSA and a RRSP in her name with trading functionality at CIBC Inv Edge.
She made $5k at a PT job in 2020 paid $6 in taxes.
QUESTION: Where should we put the $2000?

I was thinking to put the $2k in the TFSA for now, and then pull out and put in the RRSP when her paid taxes are higher in a few years and she could benefit from a RRSP tax break?
Also, she will be going to University for the next 4-5 years.

EDIT : Her RESP has enough to cover her University and expenses for the next 5 years.
Last edited by ronatola on Feb 25th, 2021 12:58 pm, edited 1 time in total.
18 replies
Deal Addict
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Dec 24, 2007
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Defer RRSP until she has higher income.
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Oct 24, 2010
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TFSA. No question.
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Dec 11, 2005
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Until there is a point where she is earning at a higher tax bracket, an RSP serves no purpose and would actually be counterproductive.

Do not fall for the "tax break" mentality. The TFSA is a better retirement savings vehicle for a lot of people who don't earn a large income.
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TFSA for sure, but...

Consider her situation. She has just turned 18, she is going to university. University is expensive, and there are many opportunities for her to take. She is young and there are many things she may want to do, all of which generally costs money. While starting early investing is important, ensuring she has cash on the side may be more valuable right now she can take advantage of certain prospects. Getting tied into investments and when something comes up means she may either be forced to sell at a loss to access the cash or forgo the opportunity. She is young enough that there is time and place for her to make long term investments. And some scholarships for example are needs based and do not like to see long-term investments or assets.

Of course, if you have assets and cash for her university and costs already accounted for, go ahead. But she may benefit more of having some or all of this cash as savings on the side. If that is the case, a TFSA not in Investor's Edge might be better. A HISA TFSA is likely the best route.
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[OP]
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Nov 9, 2006
373 posts
60 upvotes
xgbsSS wrote: TFSA for sure, but...

Consider her situation. She has just turned 18, she is going to university. University is expensive, and there are many opportunities for her to take. She is young and there are many things she may want to do, all of which generally costs money. While starting early investing is important, ensuring she has cash on the side may be more valuable right now she can take advantage of certain prospects. Getting tied into investments and when something comes up means she may either be forced to sell at a loss to access the cash or forgo the opportunity. She is young enough that there is time and place for her to make long term investments. And some scholarships for example are needs based and do not like to see long-term investments or assets.

Of course, if you have assets and cash for her university and costs already accounted for, go ahead. But she may benefit more of having some or all of this cash as savings on the side. If that is the case, a TFSA not in Investor's Edge might be better. A HISA TFSA is likely the best route.
Yes, her RESP is enough to cover her University and expenses for the next 5 years. I will update the original post with this. Thanks for the response.
Member
May 24, 2018
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Ontario
ronatola wrote: ...
She made $5k at a PT job in 2020 paid $6 in taxes.
...
Are you sure about that ? Basic personal amount is $13,229 ( meaning no tax expected up to that amount )
[OP]
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Nov 9, 2006
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hwyc2007 wrote: Are you sure about that ? Basic personal amount is $13,229 ( meaning no tax expected up to that amount )
Ya I'm not sure what happened there. She get's it refunded however.

On a related note - Can she ask her employer allocate say 15% towards income tax per payslip? That way she will get a decent return.
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ronatola wrote: Ya I'm not sure what happened there. She get's it refunded however.

On a related note - Can she ask her employer allocate say 15% towards income tax per payslip? That way she will get a decent return.
Yes she can request additional tax be deducted by completing a revised TD1 form with her employer. The question though is why loan money to the government with no benefit in return. Maybe have a portion of each pay cheque automatically transferred to savings instead.
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May 24, 2018
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So the same PT will continue into her college years. Perhaps redo TD1 & TD1ON (assuming Ontario) forms downable here.
Last edited by hwyc2007 on Feb 25th, 2021 3:11 pm, edited 1 time in total.
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ronatola wrote: Ya I'm not sure what happened there. She get's it refunded however.

On a related note - Can she ask her employer allocate say 15% towards income tax per payslip? That way she will get a decent return.
Why? Are you concerned with her spending it?

If she doesn't or isn't going to owe taxes, it would be better to set up an automatic transfer of the 15% directly to a TFSA so that she's investing in herself, not loaning money to the government interest free.
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Dynatos wrote: Why? Are you concerned with her spending it?

If she doesn't or isn't going to owe taxes, it would be better to set up an automatic transfer of the 15% directly to a TFSA so that she's investing in herself, not loaning money to the government interest free.
This. She's far better off allocating 15% of her income to a savings vehicle under her own control rather than lending the money to the government. They don't pay any interest.

C
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Jan 2, 2015
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ronatola wrote: Daughter just turned 18. I have $2000 for her. I opened a TFSA and a RRSP in her name with trading functionality at CIBC Inv Edge.
She made $5k at a PT job in 2020 paid $6 in taxes.
QUESTION: Where should we put the $2000?

I was thinking to put the $2k in the TFSA for now, and then pull out and put in the RRSP when her paid taxes are higher in a few years and she could benefit from a RRSP tax break?
Also, she will be going to University for the next 4-5 years.

EDIT : Her RESP has enough to cover her University and expenses for the next 5 years.
If I may suggest asking her to take part in this discussion and the actions associated with it. These are important life skills.

To answer your question is, I would have her put the $2k into her TSFA. It gives her the most flexibility with the money. Then I would sit down with her and discuss her financials goals, time horizon and risks. Then I would also work out a plan on what she can do with some of her PT money and discuss the importance of saving a little, or even the whole tax refund so she maxes out her tsfa. This also makes it easier because the amounts are a little higher, she can have a few more options in what she may invest in. If she can do this for a few years while she is in school, then she will be in a great position of no debt, max tsfa, and she has built the important skill of paying her self first.

I know this is more than what you asked for, my nieces and nephews who are now grown (and pretty awesome with their finances) were taught this. Every year they maxed out their TSFA while in school, school was fully funded by their RESP, then when they graduated the continued the practice of maxing out their TSFA, then their RRSP. Both had enough savings of their own for 20% + down payment on a condo (one in GTA) by the time they finished their full programs and worked a couple of years.

We have started the same with our kids but since they minors we did it in an in trust account, and my youngest managed her first trade (under my supervision) at age 12. Her goal was to have enough ($6k to transfer into her account when she turns 18) (Sorry, this is a PROUD moment for me, but since its my kids, I am bragging because I don't want to share this with people that know us).
On a 'smart' device that isn't always so smart. So please forgive the autocorrects and typos. If it bothers you, then don't read my posts, but don't waste my time correcting me. If you can get past the typos, then my posts generally have some value.
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ronatola wrote: Ya I'm not sure what happened there. She get's it refunded however.

On a related note - Can she ask her employer allocate say 15% towards income tax per payslip? That way she will get a decent return.
You can, but it doesn't make sense too. You would be better off teaching her to take off 15% of her paycheck and saving it herself, in the TSFA is a great place. She gets the benefits of investing the money right away, and the government doesn't get her money interest free.
On a 'smart' device that isn't always so smart. So please forgive the autocorrects and typos. If it bothers you, then don't read my posts, but don't waste my time correcting me. If you can get past the typos, then my posts generally have some value.
[OP]
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Nov 9, 2006
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Thanks for your reply proud Momma!
Yes, I will discuss with her. Good advice.
[OP]
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How do I determine her TFSA contribution room if this is the first year she has filed a tax return? She turned 18 2 days ago.
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Oct 14, 2012
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Woodstock
Does she actually have any RRSP contribution room yet? It doesn't sound like she has earned enough to have much/any?
Watch out for fees at brokerages. If a RRSP account has less than a certain minimum balance it usually has a quarterly or annual fee. Are you sure she can have a RRSP account at InvestorsEdge with no / low balance for free?
[OP]
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BetCrooks wrote: Does she actually have any RRSP contribution room yet? It doesn't sound like she has earned enough to have much/any?
Watch out for fees at brokerages. If a RRSP account has less than a certain minimum balance it usually has a quarterly or annual fee. Are you sure she can have a RRSP account at InvestorsEdge with no / low balance for free?
You're right. I just found that tidbit on their site. No mention of it when signing up tho.
Now we get to wait 3 hours on the phone to tell someone to cancel it. Hopefully before we get charged.

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