Q. I would like to open a TFSA for my daughter, but I want to have control of it until she becomes more responsible with money. Is this something I can do?

It’s great that you want to help out your daughter. You’re part of a growing trend of parents giving their children a financial boost.

The benefits and flexibility of a TFSA make it an ideal solution to save for multiple financial goals.

Nevertheless, there are a few issues with your plan to open a TFSA for your child.

Opening a TFSA for a Child

First of all, you don’t say how old your daughter is. By law, a person can only set up a Tax Free Savings Account once they’ve reached the age of majority for their province.

Age of majority is:

  • 18 – in Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan.
  • 19 – in British Columbia, New Brunswick, Newfoundland & Labrador, North West Territories, Nova Scotia, Nunavut, and Yukon.

TFSA contribution room starts to accumulate at age 18, though. So, if your daughter turned 18 this year and lives in, say, Ontario, she can contribute $5,500 this year and $5,500 next year.

However, if she lives in British Columbia, for example, she has to wait until next year to contribute $11,000. This, unfortunately, results in a loss of one year of tax-sheltered growth of the investments held in the account.

The TFSA must be opened in your daughter’s name and the account will belong to her. You can’t actually contribute to someone else’s TFSA, but you can gift money to adult children, so they can make their own contributions. The income earned is not attributed back to you as with non-registered accounts. Your contributions will help her accumulate savings.

You can show your child the importance of establishing a savings habit. Sometimes, promising to match her contributions will encourage her to save and help her accumulate more savings.

The risk? There is absolutely nothing to prevent your daughter from withdrawing the money in the account, because technically, this would be her money.

If you are concerned about control, you’ll need to set up a “living trust,” but that’s a whole other post.

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