Every Canadian should work to build up savings for retirement. Why not invest that savings totally tax-free inside a TFSA (Tax-Free Savings Account)?
Every Canadian who is 18 years or older in 2025 should have at least $7,000 of new TFSA contribution room this year. If you have that space available, you should maximize it.
No other account in Canada allows you to invest, grow your capital, and pay zero tax on your gains. Inside the TFSA, you pay no tax on your income earned and no tax when you withdraw from the account.
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Adding to your TFSA is a great way to improve your long-term finances
Using your TFSA to grow your savings is one of the best financial moves you can make. It is completely free to do and only takes a few minutes to set up at your bank or brokerage.
Many people use the TFSA as a basic savings account. This is better than nothing, but when you are only earning 1.5–2.5% on your capital, you’re not even exceeding inflation most years. If you want to not only preserve but also grow your capital, you are better off investing.
Canada has many great companies worth holding inside a TFSA. Here are two Canadian staples to consider owning in a TFSA.
Royal Bank: A top Canadian stock for any Canadian
Royal Bank of Canada (TSX:RY) is Canada’s largest bank and also its largest stock. This is a name that most Canadians are familiar with and see in their daily life.
Royal is not Canada’s largest bank for no reason. It has been one of Canada’s best-performing banks as well. Its stock is up 92% in the past five years and 129% in the past 10 years. However, if you add on its dividends compounded, those total returns look like 134% and 240% respectively.
This bank has won the day by growing very prudently and making the least number of mistakes. Today, it is a dominant force. While RY stock may not grow as quickly as other Canadian stocks, you can expect it to beat inflation and deliver an attractive (and growing) stream of dividends.
This TFSA stock yields 3.5% today. It has grown its dividend by a 7% compounded annual growth rate (CAGR). For a stock that might just exceed the market in the years to come, this is a solid Canadian name to own.
CP Rail: A TFSA stock for growing earnings and income
Another attractive TFSA stock is Canadian Pacific Kansas City (TSX:CP). This company has been operating since 1881. So far, it has stood the test of time. There is no other way that goods and bulk commodities can be moved en masse across the continent in an efficient and affordable manner.
CP has the only network that connects Canada, America, and Mexico. The combination of CP and Kansas City Southern is driving substantial synergies and growth opportunities.
Over the past several quarters, CP has delivered the best results amongst railroad peers. It should grow despite a freight recession in North America.
CP’s management team has been a master at implementing precision railroading. Strong free cash flow generation is helping it quickly deleverage its acquisition-related debt. The transcontinental railway has returned to a shareholder return posture.
This TFSA stock just increased its annual dividend by 20%. It also announced a 4% share buyback. While CP has a small 0.85% dividend, that yield should grow if it can hit its mid-teens earnings per share growth plans in the years ahead.
