The Easiest Way to Turn Your $6,000 TFSA Into $60,000

If you want to turn a small $6,000 TFSA balance into $60,000, dividend-growth stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) can come in handy.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Do you want to enjoy the tax benefits of a Tax-Free Savings Account (TFSA) but worry that the small contribution limit will impede your saving potential?

Aside from using accumulated contribution room from past years, there aren’t many ways around the conundrum.

Sure, you can contribute to an RRSP and a TFSA simultaneously. But the tax benefits of RRSPs are completely different from those of TFSAs, and because of the withdrawal fees, RRSPs aren’t ideal for short-term saving.

Ultimately, the TFSA contribution limit puts a pretty low ceiling on how much you can save. However, saving and investing are two different things. If you maximize your TFSA returns, you can end up with a fairly high balance, even with the low ceiling. And there’s one very good, overlooked way to do that — without having to buy ultra-risky stocks.

Reinvest your dividends

Automated dividend reinvestment is one of the best ways to maximize your TFSA returns. Many blue-chip, dividend-paying stocks have plans available where your dividend payouts are automatically spent on more stock, with the end result being that your position gradually increases over time. So, not only do you see your share price increase (if all goes well), but you also gradually accumulate more shares.

Consider Toronto-Dominion Bank (TSX:TD)(NYSE:TD), for example. TD is a blue-chip Canadian bank stock that lets you reinvest your dividends automatically. Over the past five years, TD has delivered an approximately 25% return — not exactly earth shattering, but significantly boosted by a dividend with an average yield of about 4%. By buying TD and reinvesting your dividends, you’d have received a return much higher than 25%. The same is also true if you’d invested in TD and gotten paid cash dividends, but the return would have been less than if you had reinvested them.

The lesson?

If you’re buying shares and you can reinvest your dividends, do so. If the stock does well, your ultimate return will be much higher.

Contribute the maximum amount each year

A second point about TFSAs is worth mentioning: always contribute as much as you possibly can.

The TFSA contribution limit for 2019 is only $6,000, so even somebody earning minimum wage in a low cost-of-living area could contribute the maximum. In light of this, there’s no reason not to contribute the maximum — unless you have some financial obligation, like debt payments or an RRSP you’re trying to max out.

Additionally, TFSA contribution room is cumulative, so if you open one for the first time this year, you may be able to contribute up to $63,500. You do need to have been over 18 in 2009 (the year TFSAs were created) to get a full 10 years of accumulated contribution space, but if you’re over 19 today, you have at least some space accumulated from previous years.

Should you invest $1,000 in Ats Corp. right now?

Before you buy stock in Ats Corp., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Ats Corp. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button owns shares of TORONTO-DOMINION BANK.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 2 Top TSX Stocks With Decades of Dividend Growth

These stocks have great track records of delivering dividend growth in challenging economic conditions.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA: Invest $15,000 in This TSX Stock and Create $884 in Annual Passive Income

This TSX stock certainly has quite the long-term outlook -- one that could create passive income now and decades to…

Read more »

Dividend Stocks

Invest $20,000 in These REITs for Over $1,000 in Annual Passive Income

Are you looking for a boost in your passive income? Then consider these two REITs for your self-directed investment portfolio.

Read more »

Asset Management
Dividend Stocks

How I’d Allocate $10,000 in 2 Canadian Growth Stocks for the Long Run

Both growth stocks offer a compelling mix of income, growth, and value, and I believe they can outperform over the…

Read more »

grow money, wealth build
Dividend Stocks

2 Dividend-Growth Stocks to Buy on the Pullback

These stocks have increased their dividends annually for decades.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

BCE Stock Analysis: A Smart Choice for Potential Value and Income

BCE stock has slipped to its June 2009 level amid Trump tariff uncertainty and intensity. Does the sharp dip provide…

Read more »

Person slides down a stair handrail
Dividend Stocks

Should You Buy Cargojet Stock at $70?

Cargojet stock might be down, but don't let that scare you off. It's still a long-term opportunity.

Read more »

Middle aged man drinks coffee
Dividend Stocks

3 Monthly Dividend Stocks to Buy and Hold Forever

Add these three TSX dividend stocks to your self-directed portfolio for reliable monthly passive income.

Read more »