Investing for Teens in Canada: How to Get Started

If you’ve begun saving money from birthdays, holidays or part-time work, you might be wondering how to make those savings grow. Learning to save is a valuable habit for young people; investing those savings can be the next step toward financial independence.

Across Canada, personal finance education in elementary and high schools has expanded in recent years, and social media now offers far more information about money and investing than when many adults were young. Some of that content is helpful, but some is misleading. Before making any financial decisions, seek qualified advice or enroll in a reliable personal finance or investing course.

How to start saving as a teen (or younger, or older)

Minors—typically under 18 or 19, depending on the province or territory—usually need a parent or guardian listed on financial accounts. Parents or grandparents can open a bank account for a child, even a newborn. These accounts often have no monthly fees or come with small bonuses for opening them. Young people can be given debit cards and online access to learn how to manage money responsibly.

How to invest as a teenager

If you’ve reached the age of majority in your province, you can open your own brokerage account. If not, a parent or grandparent can open an account in trust for you. Two common options are informal (in-trust-for, or ITF) accounts and formal trusts.

An informal trust is straightforward: the adult manages the account until the minor reaches the age of majority and can trade securities independently. A formal trust involves a lawyer and a trust deed that outlines the terms; it’s typically used for larger sums because of legal and accounting costs.

Note that new rules introduced at the end of 2023 require trusts with assets exceeding $50,000 in fair market value during the year to file trust tax returns. Most informal in-trust accounts won’t meet this threshold, but some could be affected.

Your money? Your (grand)parents’ money? It matters

Who provided the funds affects how income from investments is taxed. If the account is funded with the minor’s own savings—pay from work, gifts, government child benefits—then interest, dividends and other income are taxable to the minor. Many young people have incomes below the basic personal amount and therefore owe no income tax.

If a parent or grandparent funds the account, attribution rules may apply so that interest and dividends are taxed back to the adult who provided the money. Capital gains, however, are generally taxable to the minor, though those gains may be tax-free if the minor’s total income remains below the basic personal amount.

Is an RESP a good option?

Savings can also be directed into a registered education savings plan (RESP). If a parent isn’t already maximizing RESP contributions, adding savings there is often more advantageous than placing money in an informal trust. Contributions up to a certain annual limit receive a government Canada Education Savings Grant (CESG). There are also catch-up contribution provisions for missed years, and low-income families may qualify for additional grants or bonds. Using an RESP is especially useful if the goal is funding post-secondary education.

When can you use a TFSA?

Only those who are 18 or older begin to accumulate TFSA contribution room. Minors cannot contribute to a TFSA. That said, many parents and grandparents have existing TFSA space and could, in some cases, hold funds on behalf of a young person in their own TFSA. If an adult does this, they may choose to open a separate TFSA account to keep the funds distinct, and they can name beneficiaries for estate planning reasons. Be aware of potential risks if the adult becomes incapacitated or divorced.

Is it too early to invest in an RRSP?

There is no minimum age to open an RRSP account, but you need available RRSP contribution room to contribute without penalty. Taxpayers can over-contribute by a small amount without immediate penalties, but as you begin working and filing tax returns you will accumulate RRSP room equal to a percentage of earned income. RRSPs are typically less flexible than TFSAs or non-registered accounts for younger savers and are primarily designed for retirement savings.

Investing for teens: what makes sense?

If you’re involved in investment decisions for a brokerage account, keeping things simple usually works best. Diversification matters: a well-diversified portfolio generally reduces risk. For small balances, buying a mutual fund or an exchange-traded fund (ETF) is an efficient way to gain broad exposure without purchasing many individual stocks.

That said, young investors often learn a great deal by owning shares of companies they understand or use. Putting money into one or a few familiar stocks can be educational, though it increases risk. Over time, try to balance learning with diversification.

What other investments can you hold?

Common investment options include:

Cash: Chequing or savings accounts are safe places to keep money. High-interest savings accounts typically offer better returns than basic chequing accounts.
Guaranteed Investment Certificates (GICs): GICs pay a guaranteed rate for a fixed term—short-term to multi-year—typically with higher rates for longer terms.
Exchange-Traded Funds (ETFs): ETFs pool many stocks or bonds to provide instant diversification and trade on exchanges like individual stocks.
Mutual Funds: Mutual funds also hold baskets of securities but don’t trade throughout the day like ETFs; management fees are often higher.
Bonds: Bonds represent loans to governments or corporations and pay interest over time; they can be purchased individually or through funds.
Stocks: Individual company shares offer growth potential and are listed on major exchanges. Buying stocks directly can be part of a learning strategy but carries more risk.

Real estate: Ownership of real estate investments is generally limited to those who have reached the age of majority, so direct property purchases are not typically an option for minors.

The teenage crypto dream

Cryptocurrency is widely discussed online and may appeal to young investors. Most exchanges require account holders to be 18 or older, though some platforms have different rules. If a parent opens an account on behalf of a minor, it is generally in the adult’s name. Cryptocurrency profits are often treated as capital gains; if the funds and benefits clearly belong to the minor, it may be reasonable to attribute gains to the minor, but tax treatment depends on specifics.

Saving and investing: make them mean the same thing

Choosing the right account type and the right investments are the two key early steps. Learning delayed gratification and the trade-offs between risk and reward is essential. Some young people will accumulate emergency savings in cash, while others will accept investment risk for higher potential returns. The earlier these habits form, the more financially confident a young person will be as an adult.

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