While Canadians are prioritizing saving as they continue to navigate the challenges of the global coronavirus pandemic amid expectations of rising inflation in the coming year, just over two-thirds (64 per cent) know the difference between a registered retirement savings plan and a tax-free savings account, according to a new survey by the Bank of Montreal.
The finding is a four per cent decrease from 2020 and a 10 per cent drop from 2015. Despite the data, 74 per cent of survey respondents said they consider themselves knowledgeable about RRSPs, but younger investors — aged 18 to 34 — are 12 per cent less likely to be knowledgeable about the plans.
Read: A quarter of Canadians unaware of difference between RRSPs, TFSAs: survey
In addition, 73 per cent of survey respondents said they consider themselves knowledgeable about TFSAs, but only 49 per cent are aware an account can hold both cash and at least one other investment.
Canadians primarily use their TFSA accounts for various financial goals, according to the survey, with 44 per cent using the account for retirement savings, 43 per cent using it as a savings account and just 15 per cent using it as a means to achieve financial independence as early as possible.
Within TFSAs, cash is the most popular asset — more than half (56 per cent) of respondents said they have cash in their TFSA and 29 per cent said cash makes up at least three-quarters of their holdings.
Read: Fewer than half of Canadians investing in RRSPs, TFSAs
While Canadians, on average, hold $34,917 in their TFSAs — a 13 per cent increase from 2020 — barriers to contribution still exist. The survey found lack of funds (41 per cent) and other expenses (32 per cent) are the largest factors preventing Canadians from contributing to their TFSAs. Only seven per cent of respondents said they didn’t contribute due to pandemic-related reasons in 2021, a 10 per cent decrease from 2020.
“Throughout the uncertainty of the pandemic, Canadians have remained resilient and optimistic — continuing to prioritize savings and contributing to their TFSAs,” said Nicole Ow, head of retail investments at the Bank of Montreal, in a press release. “2022 is likely to bring new challenges with growing inflation and economic uncertainty as the pandemic continues into another year.”
Read: Feds urged to allow tax-deferred RRSP withdrawals during coronavirus