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BMO Annual TFSA Study: Usage and Contributions Climb, However Knowledge of Contribution Limits and Tax Penalties Remains Low Among Canadian Investors
  • Canadians usage of TFSAs jumps 13 points from last year
  • Total amount held in TFSAs has risen over 21 per cent over the last two years
  • However, many Canadians are unaware of the over-contribution penalties, while only one in ten are aware of the new contribution limits for 2019

TORONTO, Dec. 18, 2018 /CNW/ - According to the BMO Annual TFSA Study, while Canadians are increasingly turning to Tax Free Savings Accounts (TFSA) for their savings and investments needs, knowledge of key rules that govern usage of the savings vehicle remains low. The report was released ahead of the annual contribution limit going up to $6,000 next year.

The annual report, conducted by Pollara, pulls back the curtain on TFSA investment habits, knowledge, and contributions of Canadians. It revealed:

  • Usage up 23 per cent: In 2018, 69 per cent of Canadians said they have a TFSA – up from 56 per cent last year
  • Total holdings up 23 per cent: The total amount Canadians hold in their TFSAs is up 23 per cent year over year, at an average of $27,053 in 2018 – up from $22,008 in 2017 and $17,382 in 2016
  • Contributions down slightly: However, the average amount contributed is slightly down from 2017, coming in at $4,826 this year (down from $4,989 in 2017)

"Canadians are continuing to hold more year over year in their TFSAs, and it's an encouraging trend – there is an emphasis on savings," said Mathieu Lepine, Head, Term Investments, BMO Bank of Montreal. "Whether they're starting out or looking towards retirement, Canadians are flocking towards TFSAs as the account of choice. There is an opportunity for Canadians to leverage more than cash in their accounts like GICs and Mutual Funds to help the money that is being contributed work harder for them and grow."

Gaps in TFSA Knowledge Widening

However, with general knowledge of TFSAs, gaps are carrying over from 2017 and widening in some cases. The report revealed:

  • One third (33 per cent) of Canadians are not aware of the maximum contribution amount
  • Meanwhile, 40 per cent do not know that there is a tax penalty for over contribution
  • Only 11 per cent were able to identify the new $6,000 contribution limit for 2019 correctly, while 66 per cent of respondents did not know that there was a change

"Each year, we're seeing Canadians get increasingly comfortable with the TFSA," added Mr. Lepine.  "But there are a few things that Canadians need to watch out for. As Canadians of all age groups continue to look to these accounts, it's important that they track how much is being contributed. The TFSA gives Canadians the ability to grow their savings and investments tax free and carry over unused contribution room each year, but those benefits can be negated if tax penalties are being incurred due to over-contribution."

The report also pointed to how Canadians are using their TFSAs and why they aren't maximizing the contribution limit:

  • Half of Canadians are looking to their TFSA for retirement savings and 39 per cent are leveraging it as an emergency fund
  • As in previous years, Canadians again pointed to having insufficient money to meet the maximum or needing to pay for something else (43 per cent and 38 per cent, respectively)
  • Regionally, Canadians in B.C. and Alberta were more likely to cite not having enough money (66 per cent and 54 per cent, respectively) as the top reason for not reaching the contribution limit

Mr. Lepine added that the TFSA can be a great savings option to help with retirement but Canadians should seek out advice to help them understand the advantages of contributing to a TFSA over an RRSP. The regional findings suggest that financial headwinds and economic conditions in the Western provinces are making it harder for Canadians to put money aside to save. But there is still the opportunity to look to solutions like Continuous Savings Plans to help make automatic contributions to a TFSA. It is a frictionless way to save, without having to think about it.

For more information on BMO tax-free savings accounts, opening an account, or looking for help, please visit

The BMO TFSA Survey was conducted by Pollara Strategic Insights via an online survey between November 30 and December 5, 2018, with an online sample of 1,518 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 1,518 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 $774 billion as of October 31, 2018, 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.

SOURCE BMO Financial Group

For further information: Media Contacts: James DeCosimo, Toronto, | (416) 867-3996; Kim Johnson, Toronto, | (416) 867-3996

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