SUMMER JOB? build rrsp contribution room & a retirement nest egg

As the saying goes, “Give the man a fish, and you feed him for a day; teach the man to fish, and you feed him for a lifetime.” The same principle applies to financial literacy. Small lessons introduced early, including something as simple as filing a tax return, can create habits and opportunities that benefit young people for years to come.

Is there a teen in your family, perhaps a (grand)child, niece or nephew, working during the summer or part-time after school? Helping them file a tax return can be a simple but powerful way to begin building long-term wealth while introducing financial habits early in life.

Many teens choose not to file a tax return if their income falls below the federal basic personal amount, which is $16,452 for 2026. What is often overlooked, however, is that even modest earnings can generate valuable Registered Retirement Savings Plan (RRSP) contribution room.

A Case Study: Building a Retirement Nest Egg From Age 14

Here’s a simple case study: At age 14, Sam begins working part-time as a lifeguard, earning $5,000 each summer. Her aunt helps her file a tax return, allowing her to accumulate RRSP contribution room at a rate of 18 percent of earned income, or $900 annually. Even without making RRSP contributions immediately, unused contribution room carries forward indefinitely. By age 22, after graduating from university, Sam has accumulated $8,100 of available RRSP room.

When she begins full-time employment and faces a 30 percent marginal tax rate,* she contributes the full $8,100 to her RRSP, saving approximately $2,430 in taxes ($8,100 x 30%). More importantly, if investing at an average annual return of 6 percent, that single contribution could grow to nearly $75,000 by age 60 — not a bad head start for someone just beginning their career!

And the lessons extend well beyond building a retirement nest egg:

Building Lifelong Financial Habits — Supporting teens in filing taxes early can help instill financial literacy and disciplined money management habits that can carry into adulthood, when tax returns will become a necessary part of managing personal income.

Tax-Deferred Growth and Future Tax Savings Potential — Unused RRSP room accumulated in early years can later be used to reduce taxable income, potentially increasing tax savings by claiming deductions when income and tax rates are higher in adulthood.

Future Flexibility Through RRSP Programs — RRSP savings can later be accessed as an interest-free loan, including up to $60,000 under the Home Buyers’ Plan for an eligible first-home purchase, or up to $20,000 through the Lifelong Learning Plan for eligible education or training. With rising housing and education costs, every bit helps.

Encouraging a Long-Term Saving Mindset — Early exposure to saving and investing can help young earners develop consistency and discipline, reinforcing the value of long-term compounding even through small contributions.

*Illustrative. Tax rates will vary depending on income and the province/territory of residence.