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BMO Annual TFSA Report: Canadians' Knowledge and Annual Contributions to Tax Free Savings Accounts On The Rise
  • Canadians' perceived knowledge of TFSAs up compared to last year
  • Despite strong increase in average annual contributions, few meeting, or planning to meet, maximum contribution limit
  • One third are not aware of the tax penalties associated with over-contribution

TORONTO, Feb. 28, 2018 /CNW/ - Today, BMO released their annual TFSA report, which shed light on Canadians' investment habits, knowledge and contributions. The report, conducted by Pollara, found that nearly three-quarters of the country consider themselves at least somewhat knowledgeable (73 per cent) about the accounts, which is a solid increase compared to last year (70 percent), although areas of knowledge gaps remain similar:

  • One third (34 per cent) still aren't aware that over contributing will result in a penalty tax

  • Almost half (42 per cent) believe that contribution limits are linked to income,

  • Almost half (45 per cent) aren't aware or are incorrectly identified what investments are eligible to be put into a TFSA.

"While the data is encouraging year over year, it shows us that there are still key knowledge gaps relating to TFSAs and that Canadians could be using this valuable investment option more effectively," said Ryan ffrench, Director, Term Investments, BMO Bank of Montreal. "Speaking to a financial professional about their TFSAs and other investment options can help Canadians determine which are best for their individual goals, and how to best optimize their use."

Additionally, while the majority (82 per cent) of Canadians have a TFSA account or plan to open one, only a quarter correctly identified the maximum annual contribution amount of $5,500, and even more said they weren't aware of the amount at all (25 per cent and 35 per cent, respectively).

Despite that, the average annual contribution amount of $4,989 is also up from last year's $4,592 (8.6 per cent), and the amount of Canadians maxing out their contributions is up 2 per cent (17 per cent this year).

Canadians listed 'not having the money to invest more' and 'needing money to pay for other things' as the top reasons for not putting more into their TFSAs. That coincides with the top uses for TFSAs, with having the accounts as an 'emergency fund' being cited by all age groups, and millennials also leaning towards using the accounts to save for a major purchase, while those aged 35-54 are more concerned with retirement savings.

"We are seeing consistent growth with Canadians' average contribution amounts, however only a small group is maximizing the full benefits of their TFSAs," added Mr. ffrench. "Similarly to last year, we're hearing the overwhelming reason for that is not having enough to invest more than they already are, but there are solutions to help and contribution options beyond cash for Canadians to be aware of."

Mr. ffrench noted that a good way to counteract deciding between contributing to investments and cash flow is through an automated contribution plan, similar to other savings accounts, and more importantly, considering incorporating other types of investments, such as mutual funds, term investments and ETFs, that can be housed within a TFSA and offer a potentially better return.

For more information on BMO tax-free savings accounts, opening an account or speaking to an advisory, please visit www.bmo.com/tfsa.

The BMO TFSA Survey was conducted by Pollara Strategic Insights via an online survey between December 21 and 28, 2017, with an online sample of 1,500 adult Canadians. Data has been weighted using the latest census information 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.

SOURCE BMO Financial Group

For further information: Media Contacts: Matthew Duffin, matthew.duffin@bmo.com, (416) 867-3996; Michelle Agnelo, michelle.agnelo@bmo.com, (416) 867-3996, Web: www.bmo.com, Twitter: @BMOmedia

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