As I start my early 20s and become more responsible with my finances, one question I keep thinking about is where should I actually invest my money? Saving is one thing, but deciding what to do with those savings brings a whole other set of questions. Should I leave them in a savings account? Lock in a GIC rate? Start investing? And how does a Tax-Free Savings Account (TFSA) fit into all of this?
There are plenty of recommendations online. Someone will tell you to find the highest savings rate, while another person will say you should be investing everything instead. I need to combine these never-ending tips and come up with a plan that’s right for me.
What my savings actually look like
At 21, I am trying to balance expenses and responsibilities today with goals that are still quite far away. I am a student with limited income, so I have to be realistic about how much money I can set aside and how much I might need.
Right now, I have around $3,000 invested in XEQT inside my TFSA and approximately $2,000 in a high interest savings account -– that is roughly $5,000 saved and invested. These are not large amounts compared with some of the portfolios people discuss online, but they are meaningful to me. When you are working with a smaller amount of money, deciding where to put it can feel especially important because you do not have a large cushion if something unexpected happens.
Why I keep money in a high interest savings account
My high interest savings account holds the money I want to keep accessible. I earn interest while still being able to use my savings if an expense comes up. Between school, work, and everyday responsibilities, I cannot confidently say that I will not need that money over the next year.
Having around $2,000 available gives me some breathing room. If I invested everything, an unexpected expense could mean having to sell an investment at a time when its value had dropped. Keeping cash available helps me avoid depending on my investments for expenses they were never meant to cover.
When comparing savings accounts, I also want to look beyond the biggest advertised rate. How long does that rate last? What happens after the promotion ends? Are there requirements or fees? I want to understand what I am signing up for rather than assume the number in the advertisement tells the whole story. For me, easy access to the money is part of what makes the account useful.
GICs: a higher rate but locked in
A fixed-rate GIC offers a set interest rate over a specific term, with the principal returned at maturity. That predictability can be appealing. It also offers a higher rate than a savings account, although I can sometimes get some GIC-like returns through savings account promotions. However, a non-redeemable GIC generally requires leaving the money invested until the term ends. Cashable or redeemable GICs have different access conditions, so the specific product matters.
With my current savings, I do not have much money that I can comfortably commit to a fixed term. The money in my savings account is there partly because I might need it. Locking it into a non-redeemable GIC would take away the flexibility I want from that portion of my savings. Being 21 does not automatically make GICs unsuitable. If I had more savings or a specific goal with a clear timeline, I could see myself considering one. Right now, my limited savings and need for access make them less practical for me.
How a TFSA fits into the picture
My total accumulated TFSA contribution room through 2026 is $27,500. I have only contributed approximately $3,000, so I have used a relatively small portion of it. Available room depends on eligibility, contributions, and withdrawals, so keeping track of my own records matters. However, because I have so much unused contribution room, I can technically withdraw and re-contribute my current balance 9 times before having to wait until the next calendar year. Since growth (and losses) within a TFSA is not taxed even on withdrawal, the TFSA makes the most sense for me at my income level.
A TFSA can hold much more than a savings account. In my case, I use mine to buy XEQT.
Why I chose XEQT for money I intend to leave invested
XEQT is an Exchange-Traded Fund (ETF), that actually holds several ETFs within it. It provides exposure to thousands of stocks across different countries. It targets a portfolio of 100% equities, meaning its investment strategy is focused on stocks rather than a mix of stocks and bonds.
What appeals to me is its simplicity. Buying XEQT means I do not have to pick individual companies or decide how to divide my money among several separate funds. Between school and work, I want an approach I can understand and realistically maintain, and that enables me to participate in the global market that should provide me a higher return than savings accounts or GICs over the long term.
XEQT is also automatically re-balanced as needed. In plain language, re-balancing means adjusting the investments back toward their intended proportions. If stocks in one region grow faster than those elsewhere, that region can become a bigger share of the portfolio than originally planned. Re-balancing brings the mix back toward its targets. With XEQT, those adjustments happen within the fund rather than being something I have to manage myself.
However, simplicity and diversification do not remove the risk. XEQT can lose value, and my original investment is not guaranteed. I intend to leave this money invested for more than ten years. In that sense, I am choosing to mentally “lock it away” for the future. I can sell XEQT at any time along the way if I really need to, but I do not want to depend on selling it to cover an upcoming expense.
That might sound contradictory after explaining why I do not want to lock money into a GIC. For me, the difference is the purpose of each portion of my money. My cash savings need to remain available. The money I put into XEQT is money I intend to leave invested for a much longer period. For that longer-term portion, I am accepting greater uncertainty in the hope of earning a higher return than savings accounts or GICs would provide over time. That outcome is not guaranteed, even over ten years. I need to be prepared for declines and for periods when my investment performs worse than safer alternatives.
RRSPs and FHSAs: options for the future
I do not currently have a Registered Retirement Savings Plan (RRSP). My income is limited and I have responsibilities that need to come first. I am already balancing accessible savings with the amount I contribute to my TFSA. An RRSP allows eligible contributions to be deducted from taxable income, within the applicable limits. Investment income is generally sheltered while it remains inside the plan, and withdrawals are generally taxable. The value of the deduction depends on your tax situation. It will make more sense to me when I have more income.
For me, this is a question of priorities. With approximately $5,000 saved and invested and plenty of unused TFSA room, I am keeping my approach manageable. An RRSP is something I can revisit as my income and circumstances change.
I also do not have a First Home Savings Account (FHSA) because buying a home is not something I am currently saving toward. An FHSA allows eligible first-time home buyers to deduct contributions from their income and withdraw that money tax-free when making a qualifying home purchase. It is something I will consider later, even well in advance of a home purchase, because I can transfer any unused contributions to an RRSP.
A plan that fits my life today
The way I see it, I do not need every account or product to serve the same purpose. My high interest savings account helps me stay prepared for expenses. Other than that, a TFSA is my priority, and XEQT gives me a way to start investing for a future more than ten years away. Because I have so much TFSA contribution room available, I could potentially even shift most of my savings there. GICs, RRSPs, and FHSAs are options I can reconsider as my needs change.
I am still learning, and I expect my approach to change as I finish school and earn more. For now, I want to make decisions I can explain and maintain with the money I actually have. Understanding why I put money in each place helps me feel more intentional about both saving for today and investing for the future.
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