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BMO Bank of Montreal

BMO Bank of Montreal

November 09, 2010 06:00 ET

BMO Survey: TFSA Program Turns Two-Canadians Quick to Adopt but Lack Clarity on How to Maximize Their Investment

- More than one-third of Canadians hold a TFSA

- Almost 40 per cent remain unaware of TFSA investment options

- Nearly seven-in-ten agree the TFSA is a good investment and savings tool

TORONTO, ONTARIO--(Marketwire - Nov. 9, 2010) - As the second anniversary of the Tax-Free Savings Account (TFSA) approaches, BMO Bank of Montreal today announced the results of a survey revealing that, despite a healthy adoption rate, Canadians are still unclear on the fundamentals of TFSAs. 

The survey, commissioned by BMO Bank of Montreal and conducted by Leger Marketing, showed that, despite the fact that more than one in three (36 per cent) Canadians currently have a TFSA, few know what investments can be held within one:

  • Less than half of respondents (45 per cent) considered cash to be an eligible investment option within a TFSA
  • One-fifth (20 per cent) knew that mutual funds are eligible within TFSAs
  • Only one in four (26 per cent) knew GICs can be included
  • More than one-third (37 per cent) have no idea what investments are eligible

"While the adoption rate has been swift, we are seeing some uncertainty and confusion among Canadians when it comes to how to make the most out of a TFSA," said David Heatherly, Vice President, Bank of Montreal. "Much like an RRSP, TFSAs are very flexible investment tools that allow Canadians to tax shelter their investments within a number of different investment vehicles."

The survey also found that, of those who do not hold TFSAs, 40 per cent stated it is because they do not have enough money to invest in one. 

"Investing in a TFSA doesn't have to be a huge financial commitment – even a small amount will provide Canadians with the benefits of tax-sheltered savings and tax-free compounding," said Mr. Heatherly. "However, we encourage Canadians who are in a position to do so to try to contribute the maximum amount per year. This will allow for even greater tax savings while building up their investment portfolios." 

Other Key Findings:

  • Regionally, those in Ontario are more likely to be aware of TFSAs (62 per cent) relative to those in Atlantic Canada (50 per cent).
  • Of those surveyed, men were more knowledgeable about TFSAs (67 per cent) compared to women (55 per cent).
  • 64 per cent indicated they would open a TFSA if they knew the benefits included access to funds on a tax-free basis, a competitive interest rate on any cash held in the account and no fees for contributions or withdrawals.

"When looking at the overall health of your investment portfolio, it's important to take advantage of tax-sheltered investment options," said John Waters, Manager, Tax Planning, BMO Nesbitt Burns. "Taxes can have a significant impact on net investment returns achieved, which is why TFSAs are increasingly playing an essential role for a large number of Canadians looking to balance their portfolios."

TFSA Basics:

  • Canadians age 18 and older can contribute up to $5,000 per year into a TFSA. Any unused contribution room from the previous year can be added to the contribution room for the year. In addition, any withdrawals can be re-contributed the following year without affecting your annual contribution limits.
  • TFSAs can hold the same investments as in a registered retirement savings plan, including cash, mutual funds, stocks, GICs and bonds.
  • Contributions to TFSAs are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.

BMO offers various tools and resources Canadians can use to help minimize the taxes they pay and generally make sense of their investments. BMO recently launched BMO SmartSteps for Investing, a program designed to help Canadians make sense of savings and investing and help them keep more of their money, stay on track with their investments and grow their money for the future. Please visit www.bmo.com/smartinvesting.

The survey was completed with 1513 Canadian adults and was conducted using Leger Marketing's Web panel between October 25 and 27, 2010.

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