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.