Transform Your TFSA Into a Money-Making Machine With Just $12,000

Your TFSA isn’t just for saving; it’s for making money. So, here’s how to start pumping it out with just $12,000.

Amy Legate-Wolfe

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. Before joining Motley Fool Canada, she 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. 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 February 12, 2025 4:10 pm EST

Transforming your Tax-Free Savings Account (TFSA) into a money-making machine doesn’t require a massive investment. With just $12,000, you can set up a steady income stream by focusing on solid Canadian stocks that offer both stability and growth. Two great picks for this strategy are Exchange Income (TSX:EIF) and Bank of Nova Scotia (TSX:BNS). Both provide strong dividends and long-term appreciation potential. By holding these stocks in a TFSA, investors can benefit from tax-free income and compounding returns over time.

Canadian dollars are printed — Source: Getty Images

EIF

Exchange Income is a diversified acquisition-oriented company with holdings in aerospace, aviation, and manufacturing. It has been a strong performer on the TSX, averaging an impressive annual return of 19% over the past 19 years. This means it has outpaced the broader TSX market and rewarded long-term shareholders with significant gains. What makes EIF particularly appealing is its ability to generate consistent revenue across multiple industries, reducing the risks associated with relying on a single sector. Investors looking for stability with strong dividend payments have found EIF to be a reliable choice.

In its latest earnings report for the third quarter of 2024, Exchange Income posted record results, with net earnings reaching $56 million, up from $50 million in the same period the previous year. The company managed to achieve this growth despite facing higher interest expenses and depreciation costs. This resilience demonstrates the strength of its diversified business model. And this allows it to weather economic fluctuations while continuing to expand. Its ability to generate reliable cash flow has also made it a favourite among dividend investors who value steady income.

Looking ahead, EIF continues to show promise. The company is actively expanding its operations through strategic acquisitions and investments in high-growth sectors. With a forward dividend yield of nearly 5%, it remains an attractive choice for those looking to build passive income. Given its strong track record and disciplined approach to capital allocation, EIF appears well-positioned to continue delivering value to shareholders in the years to come.

Scotiabank

On the other side of the portfolio, Bank of Nova Scotia provides a stable, blue-chip investment with a long history of paying dividends. Commonly known as Scotiabank, BNS is one of Canada’s largest financial institutions and plays a key role in the country’s banking sector. It has a strong presence both domestically and internationally, with operations in Latin America and the Caribbean providing additional revenue streams beyond Canada. For income-focused investors, BNS is particularly appealing because of its consistent dividend payments and strong capital base.

In the fiscal year ending October 31, 2024, Scotiabank reported diluted earnings per share of $5.87, a slight increase from $5.72 the previous year. The bank maintained a return on equity of 10.2%, highlighting its stable profitability. However, it faced challenges in the fourth quarter of 2024, as higher taxes and increased expenses related to compensation and technology contributed to lower-than-expected profits. While this short-term weakness led to some investor concern, the bank’s long-term fundamentals remain strong.

Despite recent earnings pressures, Scotiabank continues to focus on strategic growth initiatives. Its emphasis on North American trade corridors, as well as efforts to streamline its Latin American operations, should support profitability moving forward. Additionally, with a dividend yield of over 5%, BNS provides investors with reliable income that can be reinvested for compound growth. Historically, Canadian banks have been some of the most resilient and well-regulated financial institutions in the world, making them a solid choice for conservative investors.

Bottom line

By allocating your TFSA funds to a combination of Exchange Income Corporation and Scotiabank, you can achieve a balance between income and growth. EIF offers high returns and strong dividend payouts, while BNS provides stability and a steady income stream. Together, they form a powerful duo that can turn a modest $12,000 investment into a long-term wealth generator. As dividends continue to roll in and are reinvested, the compounding effect will further enhance the value of your TFSA over time.