- 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
TORONTO, Dec. 15, 2020 /CNW/ - As Canadians navigate
the uncertainty of the COVID-19 pandemic, they are also focused on
saving for their future. According to BMO's annual TFSA survey, a
majority of Canadians were able to contribute what they were
expecting to their TFSAs in 2020 and many were able to increase
their overall contributions. But while Canadians continue to favor
TFSAs, many are not taking full advantage of them.
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,
BMO Bank of Montreal. "With a
higher level of savings, investors are turning to options like
TFSAs – a flexible investment and saving option. If anything, 2020
has highlighted the importance of maintaining a savings plan to
build rainy day funds or invest for longer-term goals and a TFSA is
the right vehicle for these various scenarios."
According to BMO Economics, it is estimated that excess savings
reached $150 billion and disposable
income was up 10.6 per cent above year-ago levels by the third
quarter. With healthy savings and disposable income, it could
support activity and economic recovery in the year ahead.
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 and Alberta 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.
The BMO TFSA Survey was conducted by Pollara Strategic
Insights via an online survey of 1,500 adult Canadians conducted
between November 17th and 23rd 2020.
The margin of error for a probability sample of this size is ±
2.5%, 19 times out of 20.
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,
BMO Wealth Management and BMO Capital Markets.
Internet: www.bmo.com
Twitter: @BMOmedia
SOURCE BMO Financial Group