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Tax-Free Savings Accounts (TFSA): 

In their 2008 budget, the federal government introduced a new savings account to help individual Canadians accumulate a greater pool of savings – the Tax-Free Savings Account (TFSA). This new TFSA became available for Canadian residents,18 years of age and older, on January 1, 2009.  In that first year between January 2009 and December 2010, over 4.8 million Canadians deposited more than $19 billion into their TFSA accounts.


By the end of 2013, more that 10.7 million Canadians held a TFSA, holding more than $120 billion. While that may seem like a very high number, it is still a drop in the bucket when you compared it to the over $1.0 trillion we've accumulated in our registered accounts (RRSPs, RRIFs, LIRAs, etc). 

Some recent surveys have tried to discover why so few Canadians are taking advantage of the TFSA. And a couple of recent surveys by the Government of Canada (April 2015) and Bank of Montreal (January 2016) uncovered the following interesting facts about TFSAs:

  • More than 80% of all TFSA holders earn less than $80,000 per year and they own 75 per cent of all TFSA assets. (About 50% of TFSA holders had annual incomes of less than $42,000.)
  • Only 55% of Canadians have a TFSA.
  • On average, they have only accumulated $17,133.00
  • 48% of TFSA holders are using their savings for retirement, 38% use the account as an emergency fund and the balance use it to save and buy stuff.
  • Of the $120 billion accumulated in TFSAs, $78 billion is held in cash and $31 billion is invested in mutual funds.
  • 67% of TFSA holders say they are somewhat knowledgeable about TFSAs and 17% say they are very knowledgeable. Yet only 3% could correctly answer eight basic true or false questions.

In all of the surveys we have reviewed, those Canadians without a TFSA account have cited the following two main reasons for not opening a TFSA account.

  • Canadians are finding it increasingly difficult to save. With increasing family expenses, juggling their debt burdens and a need to save for retirement, Canadians do not feel they have any extra money to contribute to a TFSA account.
  • Many Canadians find TFSAs confusing and complex.

Despite 48% of Canadians saying their TFSA savings is for retirement, its clear, from the investments held, the majority of Canadians still view the TFSA as a place to hold short-term savings, not a place to accumulate longer-term investments. It appears that Canadians have assigned specific purposes to the different types of accounts available to them. In effect, judging by their investment choices, Canadians seem to believe that:

  • Registered Retirement Savings Plans (RRSPs) are for retirement savings
  • Taxable Investment Accounts (TIAs) are for long-term savings and investments
  • Tax-Free Savings Accounts (TFSAs) are for short-term, emergency savings

Unfortunately, if this is true, then Canadians are missing out on one of the greatest advantages of a TFSA – the long-term accumulation of tax-free investment income. In this TFSA section we would like you to take this opportunity to learn more about TFSAs, from the types of TFSAs available to the rules that govern contributions, withdrawals, fees, etc. so that you can make a more informed decision in your effort to optimize your investment portfolio.

Note: For a comparison between TFSAs and RRSPs, see our section Comparing a TFSA to an RRSP.  For additional government information concerning TFSAs, visit the following government websites:

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