A decade after Tax-Free Savings Accounts (TFSA) were first introduced, Canadians still aren’t taking advantage of the investment opportunity that comes with tax-free returns, opting to instead use their accounts for savings storage.
That’s according to RBC’s 2019 Financial Independence in Retirement Poll, which found that while more Canadians hold TFSAs (57 per cent) than Registered Retirement Savings Plans (52 per cent), 43 per cent are misinformed about TFSAs and believe they are for saving, not growing, money.
The poll found that 42 per cent of Canadians are using TFSAs as savings account and to hold cash, while 28 per cent are using them to hold mutual funds, 19 per cent to hold stocks, 15 per cent to hold GICs and just 7 per cent include exchange-traded funds (ETFs.)
“Canadians are drawn to the flexibility of saving cash in their TFSAs, but it shouldn’t stop there,” RBC Financial Planning Centre of Expertise director Stuart Gray said in a statement.
“The true advantage of contributing money to your TFSA is to help you reach your goals, not just having a short-term savings account.”
Gray also said the “savings” title has misled many Canadians into overlooking investments that they can hold in their accounts. About two-thirds of Canadians polled said they have not withdrawn money from their TFSAs account.
According to the poll, the top reason for using a TFSA is to save for retirement (38 per cent), followed by saving for an emergency (35 per cent), and sheltering savings from taxes (32 per cent).
In fact, TFSAs have become the preferred option for Canadians over the age of 55, who have in the past focused their investments on RRSPs.
The RBC poll surveyed 2,000 Canadians over the age of 18 online between Nov. 20 and Nov. 26 of last year.