Canadians Contribute Less to their TFSAs in 2016
BMO Financial Group today released the results of its annual Tax Free Savings Account (TFSA) study, revealing Canadians’ annual contributions in 2016 are down from last year ($4,592 vs. $5,531, respectively).
The report, conducted by Pollara, also revealed:
- Canadians hold more in their TFSAs this year – averaging $17,328, up from $17,133 last year
- However, the most common reasons for contributing less this year include not having enough money to invest (43 per cent), and needing the cash flow for other expenses (36 per cent)
- Regionally, BC residents topped contributions for 2016 ($5,898), with Prairies residents contributing the least ($3,220)
- Further, they anticipate even lower contributions in 2017, at a projected average contribution of $4,325
“While contribution levels are slightly lower, it’s encouraging to see that Canadians, particularly millennials, have expanded their knowledge on the financial instruments they use – including the TFSA,” said Ryan ffrench, Director, Term Investments, BMO Bank of Montreal. “However, one-third are still unaware of the maximum annual contribution level, likely owing in part to changes made over the years, so more work can be done to ensure Canadians continue to gain awareness and knowledge as it relates to this important savings vehicle.”
Mr. ffrench added that while that maximum contribution amount has fluctuated, it is worthwhile to note that for 2017 it remains at $5,500.
More Canadians Know the Ins and Outs of TFSAs
According to the report, Canadians’ overall knowledge of TFSAs is on the rise:
- Almost 80 per cent know cash investments are eligible for a TFSA, with 73 per cent and 69 per cent aware that mutual funds and GIC’s qualify, respectively
- Seventy-eight per cent are mindful that unused TFSA contribution room is carried forward, up 18 points from last year
- Nearly two thirds (64 per cent) know about the penalty tax that over-contribution, withdrawing and re-contributing within the same year, may cause; further, of that same group, 57 per cent know the penalty is one per cent for each month the excess money is in the account
Mr. ffrench added that Canadians looking to learn more about TFSAs should speak to a financial planner who can help bring them clarity and deliver advice they need to make responsible investment choices.
The BMO TFSA Survey was conducted by Pollara between December 14th and 19th 2016, with an online sample of 1 500 adult Canadians. Data has been weighted using the latest census data to be representative in terms of age, gender and region. The margin of error for a probability sample size of 1,500 is ± 2.5% 19 times out of 20.
For more information on tax-free savings accounts or speaking to a financial planner to learn more, please visit bmo.com/tfsa.
For more information on investing, please visit bmo.com/investments.
SOURCE BMO Financial Group