Got $10,000? Turn That TFSA Into a Goldmine!

Are you ready for some real income? Start saving up and you could turn $10,000 into a goldmine beyond your dreams!

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The TFSA (Tax-Free Savings Account) is, hands-down, the best option for Canadians looking to build long-term wealth. Why? Any income earned in the account, whether from investments or interest, is completely tax-free! This means you can let your savings grow uninterrupted. In fact, over the years, the annual contribution limit has added up to $95,000. Thus giving you a huge tax-advantaged space to build your future. But how can you get started at turning that $95,000 into even more? Today, we’ll get into it.

Getting started

To start maxing out your TFSA, it’s all about building a smart savings strategy. You can begin by setting aside small amounts from each paycheque. Think of it as paying yourself first. Even $100 a month can add up over time. Another handy tip is to redirect any bonuses, tax refunds, or windfalls straight into your TFSA, thereby boosting your contribution without affecting your regular budget. Planning your budget with these small savings goals in mind makes it easier to reach that contribution limit each year.

Once you’ve built up savings, investing inside your TFSA is where the real magic happens. With automated contributions and reinvestment of dividends, your investments can grow exponentially over time. Setting up monthly contributions to exchange-traded funds (ETF) or dividend-paying stocks lets your wealth grow passively. The beauty of reinvesting dividends is that it compounds your returns, meaning each dollar works even harder for you — all without you lifting a finger.

Created with Highcharts 11.4.3Northland Power PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Consider a monthly payer

When it comes to safe investments that pay you practically constantly, Northland Power (TSX:NPI) is a fantastic option. With a market cap of $5.27 billion and a stable dividend yield of 5.87% at writing, NPI offers both security and growth potential. The company’s focus on renewable energy projects, including wind and solar, positions it perfectly for future growth. Its second-quarter 2024 results were impressive, with sales increasing to $529 million and net income soaring to $262 million. As John Brace, Northland’s executive chair, put it, “We continue to make progress on our offshore wind projects, driving solid results.”

NPI’s earnings momentum is promising, with a 12.20% increase in quarterly revenue growth year over year. The company’s strong cash flow and investments in renewable energy infrastructure make it a reliable choice for long-term investors. With robust projects in Taiwan, Poland, and Canada, and consistent dividend payments, NPI is a top pick for building wealth inside a TFSA.

Bottom line

So, how much could investors gain from a $10,000 investment in NPI stock? Let’s say it continues to climb by its compound annual growth rate of about 3% in the last decade. Then, you add in its dividend. Here is what that could look like in just one year.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
NPI – now$21.90457$1.20$548.40monthly$10,000
NPI – 3%$22.56457$1.20$548.40monthly$10,309.92

That’s right; you could bring in $548.40 in annual dividend income plus $309.92 in returns! In a nutshell, maxing out your TFSA with regular savings and investing in solid stocks like Northland Power can set you up for long-term wealth, all while enjoying tax-free growth. With automated contributions and reinvested dividends, your money will work hard for you so you can sit back and watch your financial future flourish!

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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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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