The Tax-Fee Savings Account (TFSA) continues to be the wallflowers of retirement savings vehicles in Canada, according to a recent survey by Toronto-based ING Direct, which found that over half of Canadians (52%) have yet to open an account.

Of the 52% of Canadians who have not opened a TFSA over half say that they do not have the money to save, according to the survey. Even those who do have accounts, many do not keep their money invested for the long term.

Of those Canadians who do have a TFSA, 35% had made withdrawals from the account for three reasons: an emergency; because they had reached their savings goal; or because they view TFSA as a regular savings account.

Unlike registered retirement savings plans (RRSPs), TFSAs are not automatically thought of as a retirement savings vehicle. Only 38% of survey respondents with a TFSA account viewed it primarily as a way to save for retirement. A third of people see it as an emergency fund, particularly Canadians aged 18-24 (24% of those surveyed in this age group use it for emergencies).

As well, confusion remains around the TFSA itself as only 44% of people surveyed had a vague idea of how they worked, while 19% said they didn’t understand it at all.

According to the survey, Canadian’s views on the TFSA include:

  • three-quarters of Canadians (74%) view TFSAs as a long-term savings tool;
  • Registered Retirement Savings Plans (RRSPs) top the list as preferred investments, with 52% of those surveyed ranking RRSPs ahead of TFSAs, which came in second (29%).
  • close to half (47%) of Canadians hold their TFSA savings in a savings account; 17% in mutual funds and 10% in a GIC.
  • one quarter (25%) of respondents have used less than half of the contribution room available for 2012 (between $1 – $9,000).