- Average annual TFSA contributions increase 9.5 per cent year over year
- While popularity increases, Canadians are underutilizing TFSAs and leaving money on the table
The annual report revealed:
- Contributions held steady: Despite the global pandemic, more than half (53 per cent) of Canadians say they contributed the amount they expected this year – only slightly down from 2019 (58 per cent).
- Popularity continues to rise: A little over two thirds (68 per cent) of Canadians now say that they have a TFSA. The popularity of TFSAs has been strong over a five-year period, increasing more than 23 per cent. According to this year's survey, Millennials and Canadians over 55 are the most likely to have a TFSA (72 per cent).
- Average amount held in TFSAs spikes: On average, Canadians are holding
$30,921 in their TFSAs – up over nine per cent from 2019. Regionally, those in the Prairies hold the least in their TFSAs on average at$24,495 while those in B.C. hold the most on average at$34,880 .
"Despite such a challenging year, it's encouraging to see that Canadians are resilient when it comes to savings," said Nicole Ow, Head, Term Investments,
According to BMO Economics, it is estimated that excess savings reached
Leaving money on the table
Popularity aside, Canadians are not, on the whole, maximizing the benefits that they could reap from TFSAs:
- For Canadians that have a TFSA, cash makes up the primary investment – 38 per cent of the TFSA – followed by mutual funds and stocks at 23 per cent and 18 per cent respectively. Investors in
Atlantic Canada have the highest proportion of cash in their TFSAs at 47 per cent.Quebec andAlberta are sitting close behind with investors in both provinces having 40 per cent of their TFSAs made up of cash. - There is a gap for investors with knowing what can be included in a TFSA. Nearly a quarter (24 per cent) of Canadians are not aware what investments are eligible.
- Only half (49 per cent) of Canadians are aware that a TFSA account can hold both cash and at least one other type of investment. A quarter of Canadians indicated that they don't know what can be included, and 12 per cent believe a TFSA is cash only.
"When investing, it's important to make sure that the money being invested is working for you," added Ms. Ow. "For investors with TFSAs – especially younger investors that have a longer time horizon for tax free growth – consider sitting down with an advisor or financial planner to create a tailored plan which could include investments like GICs, mutual funds or ETFs to help you meet your financial goals. TFSAs can be a great vehicle to grow savings for short or long-term goals, but it's important to have the money that is contributed working for the investor."
For more information on BMO Tax-Free Savings Accounts, opening an account, or looking for help, please visit www.bmo.com/tfsa. As well, visit bmo.com/myplan to learn more about working with a dedicated investment professional to put a plan into action and help make real financial progress.
About BMO Financial Group
Serving customers for 200 years and counting, BMO is a highly diversified financial services provider - the 8th largest bank, by assets, in North America. With total assets of $949 billion as of October 31, 2020, and a team of diverse and highly engaged employees, BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking,
Internet: www.bmo.com Twitter: @BMOmedia
SOURCE
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