Stress Test: Here's what young Canadians are putting in their TFSAs

This episode explores the practical use of Tax-Free Savings Accounts (TFSAs) by young Canadians, featuring insights from financial experts and real-life investment stories.

1. TFSAs offer significant tax advantages and flexibility, making them popular among young Canadians.
2. Different strategies can be employed in TFSAs, from safe, interest-accumulating savings to higher-risk investments.
3. Real-life stories from investors like Sebastian and Jennifer illustrate varied approaches and outcomes in TFSA investments.
4. Expert advice underscores the importance of understanding investment risks and opportunities in TFSAs.
5. The episode also discusses the newly introduced First Home Savings Account (FHSA), comparing its benefits with those of TFSAs.

1: Introduction

Rob Carrick introduces the topic of TFSAs, discussing their importance in personal finance. Rob Carrick: "TFSAs have emerged as the best brand in personal finance."

2: Expert Discussion

Aravind Sithamparapillai explains the fundamentals of TFSAs and offers strategic advice for young investors. Aravind Sithamparapillai: "The flexibility of TFSAs makes them an invaluable tool for both saving and investing."

3: Real-Life Stories

Sebastian shares his aggressive investment strategy and its outcomes, while Jennifer provides a contrasting approach of cautious investing. Sebastian: "I took bigger risks because I was young and could afford to lose."

4: Strategic Insights

Further expert advice on optimizing investments within TFSAs and the introduction of the FHSA. Aravind Sithamparapillai: "Understanding the difference between saving and investing is crucial for using TFSAs effectively."

5: Conclusion

The hosts summarize key points and tease the next season of the podcast. Rob Carrick: "We hope this insight into TFSAs helps you better use yours."

1. Start Early: Begin contributing to a TFSA as soon as you're eligible to take full advantage of compound interest.
2. Understand Your Options: Learn the differences between savings and investment vehicles within a TFSA.
3. Set Clear Goals: Align your TFSA investments with your financial goals, whether short-term or long-term.
4. Diversify: Minimize risks by diversifying your TFSA portfolio across different types of investments.
5. Regular Reviews: Periodically review your TFSA to adjust investments as your financial situation or goals change.

We’re taking a peek into the TFSAs of regular Canadians to give you ideas of how to better use yours. In this episode, Rob chats with Aravind Sithamparapillai of Ironwood Wealth Management to break down TFSAs, FHSAs and RRSPs. Aravind is not an accredited planner. We’re also joined by two guests with very different investment strategies: a tech entrepreneur in the midst of launching his own business, and a millennial whose investment journey started somewhat unintentionally.

People

Aravind Sithamparapillai, Sebastian, Jennifer

Companies

Ironwood Wealth Management Group

Guest Name(s):

Aravind Sithamparapillai

Content Warnings:

None

Speaker A
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Speaker B
Hey, it's manica. Today we're bringing you an episode of another podcast from the stress test. They're just wrapping up their 9th season, and here's one of their most recent episodes. You can find all episodes of stress test on their feed wherever you listen to your podcasts. Hope you enjoy it. And we'll be back next week.

Rob Carrick
You've saved some money and now you want to invest. You decide on using a tax free savings account. Then what?

Romalutzio
It's easy to park your money in a registered account, like a TFSA or a first home savings account. But it can be intimidating to take the next step, actually investing your cash, especially if you're worried you could lose some of your hard earned savings.

Rob Carrick
Welcome to Stress test, the personal finance podcast for millennials and Gen Z. I'm Rob Carrick, personal finance columnist at the Globe and Mail.

Romalutzio
And I'm Romalutzio, personal finance editor at the Globe.

We know many new investors are looking for guidance about the best way to invest their money. Today we're taking a peek into the TFSAs of regular Canadians to give you some ideas of what your peers are doing with their savings.

Rob Carrick
Now don't get the wrong idea. We are not about to pick hot stocks or tell you how to make a quick score in the market. But we don't want you to leave your money sitting in your TFSA or your first home savings account or your RRSP when it could be growing up. First, we'll speak with a financial planner about exactly what a TFSA is, how best to use it, and when an FHSA or RRsp might make more sense.

Joining us from Hamilton, Ontario is Aravind Sitham, paraple, associate with Ironwood Wealth Management Group.

Aravind, I remember when tfsas were introduced in the 2008 federal budget and it was clear right from the get go that these were going to be popular. Just reading the description made me think, these are going to resonate and they have. I think TFSAs are the best brand in personal finance. Do not hear any negativity about them whatsoever. People seem to love them. I want you to start us off by telling us what are TFSAs and why are they so popular amongst young people and the rest of the population?

Aravind Sithamparapillai
Yeah, I would love to. And I agree. They, they are a great tool. And so the, the name or those letters TFSA stand for tax free savings account. Now, basically, the way it works is when you contribute money to a TFSA, so it's a registered account. So people who don't know about a TFSA, they might be familiar with, say, an RRSP or an resp.

So the TFSA is a registered account like that. But the main difference is when you put money into the TFSA, you don't get any type of tax break. However, when it's in there and you are saving or investing and the money is growing, it's growing tax free, and then you can take it out of, at any time tax free. You don't have to pay any tax on it whatsoever. And so that's what makes it very useful and flexible, especially for young people getting started with their savings, because there aren't any restrictions in taking the money out if you need it ever.

Rob Carrick
Can you explain the difference between saving and investing and how TFSA's can work for both of those purposes?

Aravind Sithamparapillai
Totally. So when we think about saving, what most people will think of is, oh, I have some type of expense or something coming up in the next six months, one year maybe, I'm building up an emergency savings fund. And the idea with that idea of saving is you want that money to be safe. You don't want to see it go down in value. And so you might open up a quote, unquote savings account at a bank, or you might purchase a GIC where you know that the interest rate is guaranteed and you know that your money isn't going to go down. You can do that inside of this TFSA. So I always use, whenever we're talking about accounts like a TFSA, I say, imagine it's like a cup, and you can put all types of things in the cup. And in this case, you've got your TFSA, which is this cup, or the account that actually holds your money. You're putting your money in there, and then you're buying a GIC or investing in a high interest savings account, and that interest is tax free. So that's saving. Now you can do the same thing with investing. You can open up a TFSA at an investment institution. So a brokerage account, if you will, and you can purchase ETF's or mutual funds or individual stocks and bonds. The difference there is, you know, when you invest that your investments can go up or down. And so while you hope it goes up over the long term, it may go down in the short term, but the key is you hold it for long enough. If you've got a well diversified portfolio and it grows to three, four, five times the value, that's all tax free as well.

Rob Carrick
Arvind, for the short term savings goals, let's say putting the money into my tv, say, for one to five years, what are your thoughts on what type of investment or savings product I should use for that?

Aravind Sithamparapillai
So I would actually rob, I would break that out into maybe like one to three and then three to five. You don't know where markets are going to go in any type of short term timeframe. So especially one to three years, you want that safe. So if you know for sure, as an example, hey, two years from now, I have to cut a tuition check because I just got accepted to a master's program.

Sure, a two year Gic might work perfectly for that defined outcome, defined timeframe goal. Uh, same thing. High interest savings accounts are a great example. When we talk about three to five, the reason I say we can break that out a little differently is a full aggressive all stock portfolio. I wouldn't recommend for anything under, you know, ten years. But if we're talking about a balanced portfolio, uh, so a moderate or a low to moderate risk portfolio, or were talking about someone whos saving month over month in their TFSA and theyre building up slowly over time and they have the opportunity to dollar cost average. If youve got five years, that might be an opportunity to look at a low, medium risk type portfolio. So something that will still go up or down. But again, if youve got five years and youre saving on a regular basis, there may be the opportunity to let that growth carry for a while.

Rob Carrick
How often do you come across people who open a TFSA with the best of intentions and never really do anything with it?

Aravind Sithamparapillai
A lot. And I say that because I think there's two types of best of intentions. I think there's people who open their TFSA and they start with 50 or $100 a month, and they tell themselves, hey, as my budget increases, I'm going to save more, build up that emergency fund, and then finally move on to investing and then life usually hits them. The other that I see very, very often is people go to the bank because they were told, hey, you can open up a TFSA at your bank. And then they end up with, especially if they think, hey, I am saving for a down payment for a house. But that house might be five to seven years in the future. And so they've been saving for three to five years in some low interest rate savings account. And then they come to me and I realize, hey, you're not quite at the point where you could buy a house and we could have been investing this money. And so there's that lost opportunity cost as well.

Rob Carrick
What are some tips you can offer for investing in a TFSA?

Aravind Sithamparapillai
So, first of all, I think it's important that you understand, anytime we're talking about investing, it's important that you understand. Do you know what you're doing? Do you understand the stock market? Do you understand enough to do it yourself? Right. Are you reading reputable sources? Are you staying engaged? And are you using a globally diversified portfolio? Many people will open and, you know, they'll pick the one or two stocks that their friend told them about. And if that's your methodology, it's probably not going to work out so well for you. And that's the other downside to investing in a TFSA. Tax free savings accounts have limited room every year. Once you turn 18, the government will add more room year over year. But if you put money in and you lose money in your TFSA, you dont get bonus room back. So thats where it becomes really important to also think about how youre handling, what youre investing in. Are you truly invested for the long term? Are you capable of withstanding losses and letting it ride out the markets going higher?

Rob Carrick
Ervin, this might be a good opportunity for you to remind us what the contribution limit is for TFSAs in 2024.

Aravind Sithamparapillai
So the 2024 contribution limit is, I believe, up confirmed $7,000. And so you get, if you are 18. So the key here is you. If you're a kid or parents thinking about it for their children, you can't open a TFSA until you're 18. But if you turn 18 this year, congratulations. You just got your 1st $7,000 of tax free savings account room.

Rob Carrick
And I think it's worth pointing out that if you don't use that room when you turn 1819, 2021, you can go back and backfill it. Correct?

Aravind Sithamparapillai
Correct. And so what we actually see a lot of, especially for the millennial range clients is many of them were in school or they had debt that they were paying off. And so when the TFSA came out back in 2008, they werent filling it up with thousands of dollars. And so theyre at a point now where there may be tens of thousands of dollars of extra TFSA room available once theyve paid off their debt. Maybe they got that first high paying job, and theyre thinking about, what can I do with this money, Trey?

Rob Carrick
Now, I want to circle back for a moment to the investing side of things and the temptation I know that a lot of young people face about choosing hot stocks and really making a quick, excellent gain in life. It's very hard to get to make a lot of money quickly. We talk about side hustles in employment. We talk about cutting costs and spending, so we have more money picking some winning stocks. And people do do it from time to time. So there is tangible success out there. How feasible is it for me to say, okay, I've got $7,000 a room in my TFSA. How about I find two or three hot stocks and I put it all on those in hopes I'll double them?

Aravind Sithamparapillai
Well, it definitely happens, right? All we have to do is turn to the news, and there's examples of GameStop Nvidia.

If you bought Apple ten years ago, look where you'd be today. So I would say that for us to say it's impossible or it never happens, um, is a lie, because all people have to do is Google stocks that have gone up like a crazy amount. So I want to address that for all of you listeners thinking, is it possible? It's possible, but it is unlikely. It is incredibly unlikely, because you have to be able to find that stock, pick it, invest in it before it's gone up. And the other thing that people fail to consider is it doesnt just go straight up. It goes up and then down. You might see 30, 40, 50% losses. And so thats assuming you even picked the right stock. But theres tons of research out there that shows that its low, low single digit percentages of stocks that do that, that actually go on to produce these massive, massive multipliers on return. And so thats why I always say it's possible. I won't tell you it's not possible, but it is incredibly unlikely. And you are more likely to lose the money that you invest that way.

Rob Carrick
I like that. Possible, but unlikely. I think that's a good framing for that. Now, Arvind, the federal government last year introduced the first home savings account, and it's got some of the attributes of a TFSA, some of the attributes of an RRSP. I wonder if you go over that for us, but also tell us, is that stiff competition for the TFSa if you're a young person with a limited amount of money to invest?

Aravind Sithamparapillai
Yeah. So to start, let's, let's talk about the RRSP for a quick second, because the FHSA basically takes the best of both worlds. So with an RSP, when you put money in, and the example I always use is, let's say you make about $100,000, the government says you're going to owe roughly about, you know, 25 grand in taxes owing. Now, if you put $10,000 in an RSP, when you go and file your taxes, what the government is saying is, hey, we're going to pretend this year that you only made 90 grandd, 100 minus ten, and you shouldn't have paid us 25 grand in taxes. You should have really only paid us about 22. So here's a tax refund if you paid too much in tax. And that's why everyone gets a tax refund from their RRSP. The kicker is that ten grand, when you pull it out later, say a retirement, or in the future, the government is standing there saying, hey, remember how we gave you a tax break? Well, we would like to take tax off that RRSP withdrawal now. So tax break going in, taxed on the way out. The first home savings account gives you that same type of tax break going in $8,000 of room per year for a total of five years from when you open it up. So you can put eight grand in and get a tax break if you use it for a qualifying purchase of a home, which most people listening to this, it'll be your first time home that you're looking to buy. You actually get that money tax free, so the government will not tax you on that money or on the growth inside the first home savings account. So, Rob, I just want to make sure.

Any questions about that? Did I break it down well enough?

Rob Carrick
I think you did a great job of that. And let's also point out that you could put in $8,000 a year to a maximum of 40,000, which in today's housing market isn't a ton. But it's still a. It's still a worthwhile endeavor, I think. But TFSA or FHSA, if I have aspirations of owning a home in the.

Aravind Sithamparapillai
Next 510, 15 years, FHSA hands down. And the reason is so your timeframe was great. 510 or 15 years from the day you open an FHSA, or from the year you open an FHSA, you have to use it within 15 years. If you don't use it within 15 years, then you either have to roll it into your RRSP or you have to dissolve it and take it as taxable income. So that timeframe is kind of important. So someone who's 18 or 19, maybe they have dreams of working abroad, maybe not a use case for them, but for most people who are making good money in that 30 ish or 43% tax bracket here in Ontario, and they've got aspirations of owning a house, the FHSA makes a ton of sense, because not only is it the 40,000 that you're contributing, but if we use that 30% tax bracket, remember, the government is saying, hey, we're going to give you a tax break, or we're going to give you that tax deduction, which means 30% on 40k is an extra twelve k in tax reduction or tax savings that you get back in your pocket that you can then turn around and invest in a TFSA if you wanted to.

Rob Carrick
When you don't make a lot of money, the idea of losing money on investments can be kind of terrifying. How would you advise people that want to invest? They want to grow their money, but they're scared of losing money and they. They're kind of paralyzed by that.

Aravind Sithamparapillai
First of all, it's normal. So if you're in that situation, don't feel bad and don't feel bad if, you know, you see on the news or you see someone else talking to you about how easy it is, or any of those pieces, because I have had clients who come to me and they kind of question that. The other piece is you can tailor the risk of the portfolio by having the right mix of stocks, bonds and cash. And so everyone kind of thinks that it's one or the other. Like, I have to have this aggressive portfolio that's super risky, that's going to go up or down a lot. But that's actually not true. You can have a, you know, you can have a portfolio that's 50% stock, 50% bonds, or if you're in a position where I. Most of your life savings are really, really important to you, then maybe you might be only starting out with 10% in stocks and the rest in cash. Is it going to grow the same? No. But we can also have that conversation, and that is a conversation I do have with many clients who are asking me, I show them different ranges of risk. I show them what the long term expected returns are, but also how those portfolio swings get bigger as you increase the risk. And that's where we work together. And the clients can kind of pick something that fits within their comfort level when they think about the ups and downs.

Rob Carrick
Trey, its interesting you mentioned rrsps because one of the things ive noticed in the last 1015 years amongst boomers who are close to retirement or in retirement is theyre very anti RRSP.

They dont like having to pay tax on the withdrawals. And that makes the TFSA look all the better in comparison because the withdrawals are tax free. Can you tell us something positive about RRSP so people have good context in making the decision between a TFSA and an RRSP?

Aravind Sithamparapillai
Yeah, I love it. And that actually opens it up for something I was going to say, which is, I think so I'll open with where I think rsps are useful, even for millennials and zoomers earlier in life is once you get married and you have kids because the RRSP contributes. Again, we talked about that deduction.

Sebastian
Right?

Aravind Sithamparapillai
So the first one savings account applies as well. And your household income is tied to certain government tested benefits. So a lot of people listening to this, if they have kids, probably qualify for the candidate child benefit. And the candidate child benefit is income tested, meaning how much household income you show determines how much money you receive. By contributing to an RRSP or anything that gives you a deduction, it lowers your household income, which actually increases your candidate child benefit. And so I discussed that as part of the conversation around what your, what that highest tax rate or that marginal tax rate or where your tax savings will be when you contribute to an RSP.

And so what I will say about the boomers who complain about the RRSP is $10,000 in an RSP and $10,000 in a TFSA are not the same thing because you didn't start that way. If you contributed ten to an RRSP, you likely got a tax refund of two, three, or $4,000 as well.

Whereas if you put ten in a TFSA, you didn't get that tax refund. And so you're forgetting about all of those extra dollars that you were given back earlier in your life when you contributed and had you invested those dollars as well.

Or, and maybe you have, you just don't realize it because you're seeing it on the back end. You're in a better position versus the TFSA, especially once you factor in those other government benefits.

Rob Carrick
After the break, we'll hear from two people with very different investment strategies.

Sebastian
So my name is Sebastian, I'm 27 years old, and I live in Montreal.

Romalutzio
Sebastian started investing in 2018. He's always loved finance, and his dad is an accountant.

Sebastian
When I started in 2018, I started in TFSA because I knew from my father and from my own research that you could start putting money when you were 18 and you would accumulate a pretty decent amount each year.

For me, it was a no brainer to be able to make money without being taxed on it, because it's really a crazy advantage to be able to put a dollar, make a dollar, and not be taxed on it. So my goal ever since I was 18, was to maximize my TFSA. Sorry. As soon as possible.

Romalutzio
Working full time and living at home allows Sebastian to invest a large amount of his income. Since he started six years ago, he's altogether made about 15% to 20% on his investments.

Sebastian
Yeah, so when I started, you know, as I didn't have a lot of money and I was still at home, I decided to take bigger risks because it was, for me, it was logic.

If I lose, you know, $10,000, I'm young, I can make myself back.

I met my parents.

My strategy at the time was go big or go broke, basically, which, looking back at it at the time, I wasn't really aware of the downsides, let's say. So I took a lot more risk at first, I was investing in companies that I believed in before GameStop, I had some lightspeed, some newbies, some canadian stocks, Suncor, which were great stocks at the time, and, well, still, some of them are still great stocks, but.

And I was able to make, I think it was during the COVID So it was really a crazy period. I think in first month, in one of my accounts, I made something like 100%, just only stocks, which was crazy.

Romalutzio
He got the lowdown about stocks on places like Reddit.

Sebastian
At one point, I ended up on Wall street bets with, you know, the initial post of roaring Kitty, where he was talking about that, about GameStop. And at that point, you know, I was. It was December, I think, and it was still on the low. I think it was trading at $12. And I told myself, if it goes to 20, I'm gonna go all in because it's gonna be a real thing. And so that happened. I bought at 20, sold at 60, and then when it went back to 80, I jumped back in the ship and I said, alright, I'm going all in.

I went to bed that night with 7000.

The next day my account was up $10,000. I was at 18. And then I went to bed stuck, doubled. And I woke up with $43,000, which was pretty crazy. Yeah, my parents, they were like, sebastian, cash out right now. And I was like, let me end all this. I know where it's going. Finally. I didn't know where it was going because on the next morning, I lost like $15,000 in 15 minutes because the market, like, crashed.

And then I exited my position at $26,000, which was, you know, a great, decent amount of money or time.

Romalutzio
That experience was a turning point for Sebastian.

Sebastian
It really changed my philosophy.

You know, I was looking at the stock every day for, for the week.

It was such a tremendous amount of stress that I was like, no, I made a really great.

I was on the winning side of that bet, which is not always the case. And as you see right now, you know, there's a lot of people losing money in those types of stocks right now because it's. There's no fundamentals behind it.

And so it really. Now I'm really more risk adverse because I just feel like in the long game, you don't need that big home run. You keep investing, compound interest are going to do the job for you.

And you'll be glad in 1015 years that you've invested a little bit of money every year and traded at a decent amount.

Romalutzio
Sebastian has recently diversified his portfolio with ETF's and bonds, but he still buys individual stocks that he believes in.

Sebastian
I think having a little bit of everything is the key.

But if you truly believe that a company will succeed, um, I wouldn't, you know, brush it off, um, and, and ignore that. Because in the end, if you. You believe in company and in, in the vision and the founders in the team, well, why not give it a shot, you know?

Romalutzio
That said, he's made some bad bets in the past. He's lost money on several canadian tech stocks and the cannabis industry, to name a few.

Sebastian
It's still hard looking back to those, like investment that. That you didn't, you know, exit at the right moment or, you know, some companies that you, you thought was the deal and finally weren't.

I'm not frustrated or I look back and I say, oh, it was great. But, you know, it's. It's a long game. I'm still young, I'm still looking forward. This is experience under my belt.

It's the kind of trades that one day you'll maybe have and you'll be able to time yourself better.

As I said right now, when I have, you know, some stocks, 20 30% gains, which is really great yield, I might take a little bit more profit now and, you know, exit earlier just to make sure I capitalize on that gain, because my past experience proved me wrong, you know. So, no, I'm not sad or anything. I look back, this is experience, and I hope I'll learn from them.

Jennifer
My name is Jennifer, I'm 34 years old and I live in Wetaskwin, Alberta.

Romalutzio
Jennifer's investment journey started somewhat unintentionally, I.

Jennifer
Guess, my first kind of foray into investing Washington. When I was working at the Apple store, it was kind of a retail job I was working at while I was in university.

At that time, there was a program where we could purchase employee stock and just have it auto invest for us, set it and forget it type of situation.

I didn't much know too much about stocks at the time, but I knew enough that it sounded like a good idea.

And if it was taken off before I saw my paycheck, I wouldn't even miss it. So I kind of just signed up for that. And to be honest with you, I didn't really pay too much attention to where it was going or how much I was getting. I kind of just let it do its thing.

Romalutzio
In 2014, Jennifer owned about 2700 of Apple stock. She'd prefer not to get into specifics about how much that stock is worth now. But let's just say that if, you.

Jennifer
Know, you know, it definitely way exceeded my expectations. I just. I thought I would have, you know, a small amount of stock that I would, you know, just have in case I wanted to buy another car or, you know, make another small purchase like that. So I kind of had it going the whole time that I was working there. It was over the course of a couple years, just over a couple years, two and a half years.

And then when I left, I still didn't much know what was going on with it. I got a whole bunch of statements. I didn't really open them. It was doing its thing. It was a lot of investing. So I kind of just left it.

And it was only probably in the last six or seven years or so that I figured I should probably take a look and see what's going on with it. And that's when I realized that it had split a few times and grown a considerable amount. So after having that experience, I realized that it was probably a smart bet to kind of do a bit more research and pursue investing a little bit more, rather than have my money sitting in a savings account or a checking account doing that thing for me.

Romalutzio
So Jennifer has no plans to sell Apple anytime soon. She started investing in earnest in 2022.

Jennifer
Like, from the time that TFSA's became an option, I was kind of aware about. Aware of it on the periphery, but I. I hadn't delved into it too deep just because at the time, I still had a considerable amount of student loans. I had a little bit of credit card debt.

There was high interest debt that I preferred to pay off before I looked at savings. I know they say that you should be putting a little bit aside in savings, even if you do have debt, but I just wanted to use the rollover method to put as much as I could towards my debt and pay that off first. So that's what I was doing. And it was. It wasn't until, really 2022 or so that I kind of got to a place where I was very close to paying off all of my debt. And I wanted to look more aggressively at investing just because of kind of like, the lack of a head start I had over the last ten years when a lot of people might have been investing at that time. And so 2022 is when I started looking into it and trying to decide what the best route would be for me to invest. And that's when I also came across, kind of looked more into the FHSA and compared the two. And that's when I kind of decided that the best fit for me right now was kind of trying to focus on maxing out my FHSA and any excess from that that I would just put into my TFSA. At that point in my life, I kind of knew that the direction I was headed in was in purchasing some sort of property.

I was kind of tired of renting. I was tired of not being completely certain of having a place to live or having a fixed cost of my rent. That kind of gave me anxiety. So I was like, I need a way to manage my expenses more, have them more in my control.

And so it was then that when I kind of started doing my research, I found out that if that is my goal of saving towards a property, the FHSAS seems like a no brainer just because all of the money that you put into there is completely tax free, as long as you use it to purchase a home.

Whereas with the TFSA, I'm still getting taxed on that money. And the only increment of that money that's tax free is whatever I make once I've put in whatever's invested and the dividends of that. And so it kind of just was a no brainer for me because I knew what I wanted to use it for, and that was the most bang for my buck to do.

Romalutzio
Jennifer renegotiated her rent so she could put more money towards her investments. She also started using a budgeting app to keep track of her expenses. In any money she cut, she invested instead, she uses wealthsimple.

Jennifer
I would say I'm kind of like a medium level risk because I'm not putting all of my money into stocks, definitely, but there is a small chunk of it I would like to put into stocks, and the rest of it I kind of would just put in. My FHC and TFSA right now are just being auto invested by weld simple's algorithm. But I did bump the risk up a little bit from what it was defaulted to.

Just because I'm not looking at using my FHSA within the next six months or anything, I have a little bit of time, so that's paid off for me.

Romalutzio
She's been tempted to invest in other individual stocks, but she's aware of how risky that could be. For now, there's only one problem with having her investments so easily accessible on her phone.

Jennifer
I know that you're not supposed to check your investments often, especially if they're kind of like a long game.

I think I'm pretty good at setting my expectations that I'm okay doing that. So there definitely are times where I'll kind of wake up in the middle of the night and log on to world simple to get a little dopamine hit, just as someone who's kind of had debt for long enough to know what it feels like to not owe anyone else your money, it's just a nice feeling sometimes to just log on and check it. But I also have done that and seen it take a tank. So I've seen it kind of be less than what I expected it to be. But it's okay with me because I know that it's kind of like it's a long game, and it is just kind of what happens to be expected.

Rob Carrick
Very few people are going to hit the jackpot on the stock market, and as you've heard, your investments can take big hits when you start stock picking. We hope this insight into how people are using their TFSAs gives you ideas of how to better use yours. Roma, what are your takeaways one, do.

Romalutzio
Something with your TFSA. You can get more than 4% returns on GIcs right now. So if you're risk averse and don't need the cash in the next year, at the very least, do that. Two, first, home savings accounts are great if you want to buy a house. If you don't, the money can go into your rrSp.

Three, if you're not sure about your housing or other life plans, don't worry about it. Tfsas are a good place to invest your money.

Rob Carrick
Thank you for listening to stress test. This show was produced by Kyle Fulton, Emily Jackson and Zara Kazema. Our executive producer is Alicia Saudi. Thank you to Aravind, Sebastian and Jennifer for joining us.

Romalutzio
Rob, that's a wrap for another season of stress test. Can you believe it?

Rob Carrick
Nine seasons in the bag. I'm already thinking about episodes for season ten. What about you?

Romalutzio
Oh, yeah, we've got a running list and we can't wait to hit the ground running in the fall. Thank you guys for listening. We hope you enjoy the rest of your summer.

Rob Carrick
Until next time, find all your personal finance news@theglobanmail.com. dot.

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