Millennials: Don’t make this TFSA mistake or you could lose a fortune

China’s richest man, Jack Ma, said, “If you put the banana and money in front of a monkey, the monkey will choose a banana because the monkey doesn’t know that money can buy a lot of bananas.” That’s exactly what millennials and Gen Zers are doing. They are just leaving money on the table by making this Tax Free Savings Account (TFSA) mistake. According to a poll by Toronto Dominion Bank41% of Gen Z and Millennials are not investing the money they have in their TFSAs:

• 27% want the resources to be available.
• 22% believe they do not have enough savings to invest.
• 22% are unsure about the investment products.
• 19% have no confidence in their investment knowledge.

TFSA Mistake #1: Not investing TFSA money because you don’t think you have enough

You don’t need $2,000 to start investing. You can start with as little as $100. An investment of $100 per week becomes $5,200 in a year. And instead of just keeping this money, even if you invested it in the most obvious instrument – ​​the exchange traded fund (ETF), you would have made a return of over 20% in a year.

If you want to keep cash, do this in the bank’s savings account. The CRA has a TFSA contribution limit of $7,000. No matter how much you earn by investing in a TFSA, whether it is $100, $10,000, or $100,000, the entire amount is tax-free.

If you earned $100,000 investment income in a regular stock account, you would have to include 50%, that is, $50,000, in your taxable income. Even taking the minimum federal tax rate of 14% results in a tax liability of $7,000 on the $50,000 capital gain. The TFSA could have saved you $7,000 in the long run.

TFSA Mistake #2: Not staying invested in the TFSA

Another big mistake millennials and Gen Zers make is not continuing to invest in the TFSA to take advantage of the benefits of compounding. We’re not talking about one stock, but a no-brainer market ETF-like BMO S&P/TSX 60 Index ETF (TSX:ZIU). It replicates the TSX 60 index, a list of the top 60 stocks in the TSX by market capitalization. The index is revised every three months, with poor performers being replaced by those who have climbed the ladder.

The ETF has returned 23% in one year and 60% in two years. If you made the mistake of withdrawing money from the market ETF within a year, you didn’t grow your money. Don’t let small wins ruin your big long-term gains. Get started by investing in an ETF instead of holding cash.

TFSA Mistake #3: Investing TFSA money in an investment with a low return

Another million-dollar mistake that millennials and Gen Zers make is investing their TFSA money in low-return instruments like a term deposit. When you have an account that allows for tax-free investment growth and tax-free withdrawals, it’s time to take some risks and invest in wealth-generating growth stocks.

Some growth stocks can turn negative in the short term, but if you buy them during the dip and stay invested, your $2,000 could become $10,000 or even $100,000. Some of the most obvious compounders are Shopify, NvidiaAnd Constellation software. Each of them had their share of dips and business risks, but their long-term growth remains intact, making them a stock to buy on the dip and hold for the long term.

Stock	Share price January 2016	Share price January 2016	Share price January 2026	A $2,000 investment in 2016 is worth it	A $2,000 investment in 2021 is worth it
Shopify	$2.90	$151.67	$216.00	$148,824.00	$2,808.00
Nvidia (in US$)	$0.82	$13.30	$188.85	$460,605.15	$28,327.50
Constellation software	$345.40	$1,647.00	$3,239.00	$16,195.00	$3,239.00

It took me two years: 2016, when the market was bearish, and 2021, when the market was bullish. Buying the dip and simply holding it can make a notable difference in returns. Now is a good time to buy Constellation Software at its low point. As for Shopify and Nvidia, consider waiting for the stocks to fall as they approach their cyclical highs.