The Tax-Free Savings Account (TFSA) is one of the best ways for Canadians to save up and create income over the years. Yet with contribution room at $88,000 as of 2023, it can seem quite daunting. How on earth are you supposed to put that much aside?
Here’s the thing. Stop wondering how you’re going to reach that limit, and instead work towards a goal. Whether it’s retirement, debt, or an emergency fund, putting even a little aside each month can help you achieve even the loftiest goals.
Today, I’m going to show you what a TFSA investor can do with just $100 per month, and how long it would take to achieve a $100,000 portfolio.
Make it automatic
Instead of leaving it up to your memory, treat TFSA contributions as a bill payment. This is a payment towards your future, so make sure you take that as seriously as a hydro bill. And honestly, $100 per month isn’t much, especially if you contribute bi-weekly.
Suddenly, $50 from each paycheque is going automatically over to your TFSA. You don’t have to think about it. You don’t have to plan for it. It just happens. Just make sure that you aren’t creating more debt to get this done. Especially with credit cards, which can have some of the highest interest rates out there.
Once you have your contributions in place, you can move onto the next step. And that’s choosing a long-term dividend stock you can hold for decades.
Go big
If you want safety, consider the Big Six Banks. But of those, Royal Bank of Canada (TSX:RY) has long been a solid and steady option. Royal Bank stock continues to expand, especially through the lucrative field of wealth and commercial management. It’s also entering emerging markets, creating even more growth that investors will see continue for decades.
What’s more, shares have increased steadily over the years. Royal Bank stock is up only 2% in the last year, it’s true. But over the last 20 years, with several downturns and two recessions, shares are up 939%! That’s a compound annual growth rate (CAGR) of 12.4% as of writing.
Further, it has a solid dividend yield at 3.95%. That dividend has grown as well, currently by a CAGR of 8.08%. So this is certainly a strong choice to consider if you want to hit $100,000.
How long it will take
Now investors merely need to see what their investments will look like if they continue to contribute $100 per month, and reinvest any passive income in that time. If they do, here is what that would look like as you work towards $100,000.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Annual Contribution | Year End Shares Owned | Year End Stock Price | New Balance |
| 1 | 1 | C$5.37 | C$5.37 | C$141.35 | C$1,200.00 | 8.89 | C$152.75 | C$1,358.20 |
| 2 | 8.89 | C$5.80 | C$51.59 | C$1,410.53 | C$1,200.00 | 16.19 | C$171.69 | C$2,778.94 |
| 3 | 16.19 | C$6.27 | C$101.49 | C$2,881.83 | C$1,200.00 | 22.94 | C$192.98 | C$4,426.42 |
| 4 | 22.94 | C$6.78 | C$155.45 | C$4,583.93 | C$1,200.00 | 29.2 | C$216.91 | C$6,332.81 |
| 5 | 29.2 | C$7.32 | C$213.85 | C$6,549.38 | C$1,200.00 | 35.01 | C$243.81 | C$8,534.65 |
| 6 | 35.01 | C$7.92 | C$277.13 | C$8,815.17 | C$1,200.00 | 40.41 | C$274.04 | C$11,073.46 |
| 7 | 40.41 | C$8.56 | C$345.74 | C$11,423.28 | C$1,200.00 | 45.44 | C$308.02 | C$13,996.39 |
| 8 | 45.44 | C$9.25 | C$420.21 | C$14,421.35 | C$1,200.00 | 50.13 | C$346.22 | C$17,356.90 |
| 9 | 50.13 | C$9.99 | C$501.07 | C$17,863.43 | C$1,200.00 | 54.52 | C$389.15 | C$21,215.68 |
| 10 | 54.52 | C$10.80 | C$588.93 | C$21,810.78 | C$1,200.00 | 58.62 | C$437.40 | C$25,641.52 |
| 11 | 58.62 | C$11.68 | C$684.43 | C$26,332.83 | C$1,200.00 | 62.47 | C$491.64 | C$30,712.38 |
| 12 | 62.47 | C$12.62 | C$788.28 | C$31,508.28 | C$1,200.00 | 66.08 | C$552.61 | C$36,516.62 |
| 13 | 66.08 | C$13.64 | C$901.23 | C$37,426.22 | C$1,200.00 | 69.48 | C$621.13 | C$43,154.28 |
| 14 | 69.48 | C$14.74 | C$1,024.11 | C$44,187.55 | C$1,200.00 | 72.68 | C$698.15 | C$50,738.68 |
| 15 | 72.68 | C$15.93 | C$1,157.82 | C$51,906.45 | C$1,200.00 | 75.69 | C$784.72 | C$59,398.05 |
| 16 | 75.69 | C$17.22 | C$1,303.33 | C$60,712.14 | C$1,200.00 | 78.54 | C$882.02 | C$69,277.50 |
| 17 | 78.54 | C$18.61 | C$1,461.68 | C$70,750.79 | C$1,200.00 | 81.24 | C$991.40 | C$80,541.20 |
| 18 | 81.24 | C$20.11 | C$1,634.02 | C$82,187.70 | C$1,200.00 | 83.79 | C$1,114.33 | C$93,374.80 |
| 19 | 83.79 | C$21.74 | C$1,821.58 | C$95,209.76 | C$1,200.00 | 86.22 | C$1,252.50 | C$107,988.23 |
As you can see, starting with even one share, you can reach well over $100,000 in only19 years! All it takes is consistency and time to make any goal possible.
