Two-fifths of Canadians with TFSAs are sitting on cash: survey

While 65% of Canadians have a TFSA, 39% of them are using it to hold cash rather than investing inside the registered account, a TD survey found.

A slightly higher proportion (41%) of Gen Z and Millennial respondents said they hadn’t invested the funds within their TFSAs, with 27% of those saying it was because they wanted the money to be readily available, 22% saying they hadn’t saved up enough to invest and another 22% saying they didn’t know what products to invest in.

“Simply parking cash in a TFSA limits its potential and, in some cases, could lead to contribution penalties if used like a regular savings account,” Pat Giles, vice-president of saving and investing journey at TD, said in a release.

While Gen Z are more likely to have opened a TFSA because it felt like a simple first step in investing (40% compared to 30% of other ages), 40% said they didn’t feel confident about when to use a TFSA or an RRSP and 32% weren’t sure they chose the right account type to meet their financial goals.

Among Gen Z Canadians without a TFSA, 74% said their lack of knowledge about the account was the biggest barrier, higher than the national average of 52%. In addition, 25% had limited understanding of the account’s benefits.

The survey was conducted by Léger from Oct. 24 to 27, with a nationally representative sample of 1,500 Canadian adults. The survey was weighted by age, gender, region, and, in Quebec, language, to match the population, according to census data.

Jonathan Got

Jonathan Got is a reporter with Advisor.ca and its sister publication, Investment Executive. Reach him at jonathan@newcom.ca.