Here's the Average TFSA Balance for Canadian Parents in Their 40s

Here’s the Average TFSA Balance for Canadian Parents in Their 40s

Parents needing to catch up with their TFSA could be in for quite the journey, which is why investors need the best ETFs on their team.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 9, 2024 4:30 pm EST

For parents in their 40s, managing finances can often feel like a high-stakes juggling act. Between mortgages, education savings plans, and the myriad expenses of raising children, it can be hard to focus on personal wealth-building.

One of the most powerful tools for Canadians to achieve long-term financial growth is the Tax-Free Savings Account (TFSA). But where does the average TFSA balance stand for people in this age group? According to a 2023 report by the Canadian Institute of Chartered Accountants, the average TFSA balance for Canadians aged 40 to 44 is approximately $20,000. Meanwhile, a 2024 Bank of Montreal survey placed the mean TFSA balance at $41,510, marking a substantial 8.3% increase from prior years. For diligent savers, balances of $50,000 to $70,000 are not uncommon by this stage of life.

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Playing catchup

If your TFSA balance isn’t where you’d like it to be, don’t despair. The beauty of the TFSA lies in its potential for growth, particularly when it’s invested wisely. The best way to grow your TFSA balance and create additional cash flow is by allocating funds into income-generating investments. This approach not only bolsters your current finances but also sets the stage for a secure retirement. Cash flow from dividends or other passive-income sources can help ease the financial pressures of daily life and even support other long-term goals like helping your kids with post-secondary education.

One standout option for those looking to generate more cash flow is Hamilton Enhanced Multi-Sector Covered Call ETF (TSX: HDIV). It’s a compelling option for investors seeking to amplify their cash flow. HDIV is an exchange-traded fund that invests in a diversified portfolio of primarily covered call exchange-traded fund (ETF) focused on Canada. It employs a modest cash leverage of 25% to enhance yield and growth potential, aiming to provide attractive monthly income and long-term capital appreciation.

HDIV

As of writing, HDIV’s top holdings include Hamilton Enhanced Canadian Financials ETF (24.90%), Hamilton Canadian Financials Yield Maximizer ETF (19.90%), and Hamilton Technology Yield Maximizer ETF (18.80%). This diversified portfolio spans sectors such as financials, technology, and energy, providing balanced exposure to various market segments.

In terms of performance, HDIV has demonstrated resilience. Since its inception on July 19, 2021, it has outperformed the S&P/TSX 60 by 3.14% annualized, with a total return of 14.14% at the end of November. While past performance doesn’t guarantee future results, these figures indicate a solid track record.

Looking ahead, HDIV’s strategy positions it to adapt effectively to market changes. By investing in a diversified, multi-sector portfolio of covered call ETFs, HDIV aims to provide higher monthly income and sector diversification. All with a sector mix broadly similar to the S&P/TSX 60.

Foolish takeaway

For parents in their 40s aiming to enhance cash flow through investing, HDIV offers a strategic avenue. Its focus on high-dividend-paying sectors, combined with modest leverage, provides the potential for both income generation and capital growth. However, as with any investment, it’s crucial to assess your risk tolerance and financial goals.

So, while the average TFSA balance for individuals in their 40s varies, there’s ample opportunity to grow your savings through informed investing. The Hamilton Enhanced Multi-Sector Covered Call ETF stands out as a promising option, blending traditional dividend investing with a diversified sector approach to potentially boost your financial well-being.