Cash has a clever disguise. It sits there, never sends a frightening earnings release, and avoids falling 12% while its owner is making coffee. That calm can make holding cash inside a Tax-Free Savings Account (TFSA) feel like postponing a decision.
It isn’t. Cash is an asset choice with its own expected return, inflation risk, and opportunity cost. Sometimes it’s exactly the right choice. Money needed soon shouldn’t be auditioning for a dramatic market comeback. Cash intended for retirement decades away deserves a harder question.
Source: Getty Images
The cost sneaks up
The 2026 TFSA dollar limit is $7,000, although investors should confirm their actual available room before contributing. Suppose that $7,000 earns 2% annually in cash or a cash-like product. After 20 years, it could grow to approximately $10,402.
Contributing uses the room, but it doesn’t automatically put the money to work. A TFSA is a tax wrapper, not an investment. Cash, stocks, bonds, and funds can all sit inside it. The account label can’t rescue a return that never gets started.
If the same amount earned an average annual return of 7%, it could theoretically reach $27,088. The difference is approximately $16,686, even without another contribution.
| AVERAGE ANNUAL RETURN | STARTING AMOUNT | VALUE AFTER 20 YEARS |
|---|---|---|
| 2% | $7,000 | $10,401.63 |
| 7% | $7,000 | $27,087.79 |
| DIFFERENCE | — | $16,686.16 |
That illustration isn’t a forecast, of course. Stock returns arrive unevenly, cash rates change, and markets occasionally behave as though everyone received different instructions. It does show why time carries so much weight inside a TFSA. Tax-free compounding has little to compound when the return remains permanently modest.
Give the cash a job
Cash can cover an emergency, a planned purchase, or the next year or two of retirement withdrawals. It can also wait briefly while an investor builds a position gradually. The problem begins when “temporary” cash celebrates its fifth birthday without receiving a job description.
Long-term money needs assets capable of increasing cash flow and distributions faster than inflation. That doesn’t require guessing next week’s market direction. It requires a repeatable plan and companies with the financial strength to survive the less pleasant portions of an economic cycle.
TOU
Tourmaline Oil (TSX:TOU) offers one example. It’s Canada’s largest natural gas producer, with operations across the Alberta Deep Basin, the Peace River region, and northeast British Columbia’s Montney Formation.
Tourmaline stock controls decades of low-cost drilling inventory. That creates potential to increase production as liquefied natural gas exports, electricity generation, and data centre development lift North American gas demand. Tourmaline stock is also building infrastructure that should reduce operating and transportation costs over time.
Its second-quarter results showed why financial flexibility counts in a commodity business. Tourmaline stock generated $192.1 million of free cash flow despite weak regional gas prices. Net debt ended the quarter at $1.5 billion, equivalent to approximately 0.4 times forecast cash flow and below management’s long-term debt target.
Rather than produce every molecule at an unattractive price, Tourmaline stock stored gas and deferred some activity until conditions improved. It also signed a long-term agreement expected to increase its exposure to higher-priced propane and butane export markets by roughly 55%.
Putting $7,000 to work
Tourmaline stock pays a $0.50 quarterly base dividend, equal to $2 annually. At a recent $59.47, a $7,000 contribution would purchase 117 full shares and produce $234 in annual base income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| TOU | $59.47 | 117 | $2.00 | $234.00 | Quarterly | $6,957.99 |
The base dividend provides a yield of approximately 3.4%. Tourmaline stock has also paid special dividends when commodity prices produced surplus cash, but investors shouldn’t build a spending plan around payments that haven’t been declared.
The stock trades roughly 9% below a $65 fair-value estimate. That offers some valuation support, although natural gas prices, pipeline constraints, and delays to new LNG projects could still produce sharp share-price swings. I’d build the position in stages and hold it within a properly diversified portfolio.
Bottom line
Leaving TFSA money in cash can be sensible when it has a near-term purpose. Leaving it there indefinitely because markets feel uncomfortable is still an active decision. Tourmaline stock offers income, growth projects, and a sturdy balance sheet that can finally give that valuable TFSA contribution a longer-term job.
