How to give your kids TFSA investment advice

By Special to MoneySense on October 29, 2018
Estimated reading time: 2 minutes

Rosie is considering helping her kids choose an ETF for their TFSAs but isn't sure which one is best

Photo from Shutterstock

Q: I would just like to get some tips on how to advise my young adults on where to invest their money. They are ages 22 and 23. It’s for their TFSA.

Should they have a geographically diversified portfolio that includes stocks from all around the world or should they be investing just in countries outside Canada? We were considering iShares Core MCSI all-country World ex-Canada Index ETF (XAW) or Vanguard Growth Portfolio ETF (VGRO). It will be untouched for at least eight years, the amounts are about $8,000 each and the kids plan to add to it yearly.

—Rosie

A: Funny, Rosie my children are in a similar situation to yours.

I think you’re asking two questions: how to advise, and which investments?

In terms of how to advise here’s a good book “Destination: Early Financial Independence” I’ve mentioned before. It’s short and to the point. The author wrote the book as if he was having a financial conversation with his children.

Do your children have any interest in investing or will you be making the investment recommendation for them?

If your children express their own investment ideas, why not (within reason) let them run with them? Better to learn with $8,000 than $800,000.

After discussing investments with my son and daughter they both decided on an investment approach similar to what you’ve mentioned.

My son soon tired of that approach feeling he could do better on his own. He’s now picking his own stocks and learning how to use an online discount brokerage. I’m not sure how his investments are going to do, or what lesson he’s going to learn, but he is going to learn.

My daughter, on the other hand, is sticking with your approach, a well-diversified portfolio which will likely do ok over time, but I doubt she’ll learn much.

Rosie, without knowing your unique situation I’m not in a position to give you specific investment advice, however, you seem to have a good handle on this one: diversified investments inside a TFSA to save on the tax.

Allan Norman is a Certified Financial Planner (CFP) with Atlantis Financial Inc. as well as an investment advisor (CIM) with Aligned Capital Partners Inc., in Barrie, Ont. You can reach Allan Norman at [email protected]

This commentary is provided as a general source of information and is intended for Canadian residents only. Allan offers investment advisory services and products through ACPI.