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And why an ETF may not be the answer
It’s true that there are conservative ETFs that are unlikely to lose value over brief periods, such as those holding bonds with maturities of less than five years. You can even buy an ETF that holds savings accounts and promotes itself as a “cash equivalent.” These ETFs might be useful in some circumstances—perhaps for traders who need to cash for short periods—I don’t think there is any reason to use them for traditional savings. ETFs are just the wrong tool for that purpose.
Dina, I suggest you consider GICs and savings accounts for your daughter’s TFSA. If you know for certain that she will not need the money for at least three years, then you could simply purchase a GIC with that term. But to avoid locking up all of her money, a more prudent strategy might be to put some in a one-year GIC that you can renew annually until her spending goal is close, and keep the rest in a savings account.
Your daughter’s TFSA returns won’t be much higher than inflation, but this is not the place to take on risk. What’s important is she’ll have a 100% guarantee that all her money will be there when she needs it.
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