Can the Maximum TFSA Room Keep Up With Inflation?

Just because you want to make major gains in a TFSA during inflation doesn’t mean making risky investments.

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 April 17, 2025 4:20 pm EDT

The Tax-Free Savings Account (TFSA) has become a super popular tool for Canadians managing their money. Since it showed up in 2009, the TFSA has grown investments without having us pay any tax on the gains. That makes it a great choice whether you’re saving for something short-term or building wealth for the future. If you’ve been eligible since the beginning and have put in the maximum amount each year, you could have a whopping $102,000 in there by 2025! That’s assuming you were at least 18 back in 2009.

But with prices for everything going up and down these days, a lot of Canadians wonder if TFSA investments can keep up. Just having money in a TFSA isn’t enough. The key is how you invest those contributions. If you just park your cash in a savings account with a low interest rate, it might not cut it. To stay ahead of inflation, you need a smarter plan.

Blocks conceptualizing Canada's Tax Free Savings Account — Source: Getty Images

Consider VGRO

That’s where Vanguard Growth ETF Portfolio (TSX:VGRO) comes into the picture. VGRO should help your money grow over the long term by investing in a mix of different things, like stocks and bonds. As of writing, VGRO has had a return of 6% in the last year. This number suggests that VGRO has the potential to grow faster than inflation. This is super important for keeping your money’s buying power strong over time.

VGRO’s investments are set up to be about 80% in stocks and 20% in bonds. This mix aims to give you good growth potential while also trying to keep the risks in check. The stock part includes companies from Canada, the U.S., and other countries, so you’re not just relying on one market. The bond part includes bonds from Canada and around the world, which can add some stability to your portfolio.

Why it works with a TFSA

One of the best things about investing in VGRO inside your TFSA is that any money you make is all tax-free! That’s whether it’s from the stocks going up in value, the companies paying you a share of their profits in dividends, or the bonds paying you interest. This means your investments can grow even faster over time because you’re not losing any of your returns to taxes. This tax-free growth is especially helpful when you’re investing in things like VGRO that are focused on growth, where those reinvested earnings can really add up over the years.

Now, it’s important to remember that VGRO, like any investment, has some risks. The value of the exchange-traded fund can go up and down with the market, and just because it did well in the past doesn’t mean it will do well in the future. Before you jump in, you should think about how much risk you’re comfortable with and how long you plan to invest. VGRO is generally a good fit for people who have a medium to long-term view and are okay with some ups and downs in the market if it means potentially getting higher returns in the end.

Bottom line

If you’re a Canadian trying to grow your TFSA savings faster than prices are going up, VGRO could be a really good option to consider. By using the TFSA, you can work towards reaching your financial goals more effectively. As always, it’s a smart idea to chat with a financial advisor to make sure any investment you choose lines up with your own personal goals and risk.