Three-quarters of Canadians have not yet opened a Tax Free Savings Account, even though 71% say they are aware of the product, according to the RBC Financial Priorities Poll released Monday.

The primary reasons why Canadians say they have not opened a TFSA are that they don’t have the money to invest (51%) or they don’t fully understand how a TFSA works (22%).

Four-in-10 Canadians who have heard of TFSAs said they want to know more about them.

“Talking to a financial advisor can help you understand the benefits of a TFSA, find the money to invest and get the right advice about investment options that are the best fit for you and your financial goals,” says Lee Anne Davies, head, retirement strategies, RBC.

For those Canadians who have opened a TFSA, the top three reasons are emergency savings (36%); sheltering savings from tax (31%); and long-term savings for retirement (30%).

While some Canadians may be preparing for a rainy day, the survey found that most Canadians are not taking full advantage of TFSAs to help them achieve their financial goals. The survey found that only 44% of Canadians who have opened a TFSA have made the maximum contribution of $5,000 and one-in-three (33%) contributed $1,000 or less. Overall, the average contribution is $2,998. As well, TFSA holdings are quite conservative, with the top three investments being savings accounts (33%), cash (20%) and GICs (18%).

“Many Canadians are missing out on the chance for tax free growth and peace of mind that a TFSA can provide,” adds Davies. “Some investors have opted to move their existing savings to a TFSA to benefit from tax sheltering — flexibility that will help achieve both short-and long-term financial goals.”

The online survey of 1,231 Canadians was conducted by Ipsos-Reid from September 10 to 17. The results are considered accurate to within +/-2.8 percentage points, 19 times out of 20.

IE