As the second anniversary of the Tax-Free Savings Account (TFSA) approaches, a survey released Tuesday reveals that, despite a healthy adoption rate, Canadians are still unclear on the fundamentals of TFSAs.

The survey, commissioned by Bank of Montreal (TSX:BMO) and conducted by Leger Marketing, showed that, despite the fact that more than 36% of Canadians currently have a TFSA, few know what investments can be held within one:

> 45% considered cash to be an eligible investment option within a TFSA;
> 20% knew that mutual funds are eligible within TFSAs;
> only 26% knew GICs can be included;
> more than 37% have no idea what investments are eligible.

“While the adoption rate has been swift, we are seeing some uncertainty and confusion among Canadians when it comes to how to make the most out of a TFSA,” says David Heatherly, vice president, BMO. “Much like an RRSP, TFSAs are very flexible investment tools that allow Canadians to tax shelter their investments within a number of different investment vehicles.”

The survey also found that, of those who do not hold TFSAs, 40% stated it is because they do not have enough money to invest in one.

Other Key Findings:

> regionally, those in Ontario are more likely to be aware of TFSAs (62%) relative to those in Atlantic Canada (50%);
> of those surveyed, men were more knowledgeable about TFSAs (67%) compared to women (55%);
> 64% indicated they would open a TFSA if they knew the benefits included access to funds on a tax-free basis, a competitive interest rate on any cash held in the account and no fees for contributions or withdrawals.

The survey was completed with 1,513 Canadian adults and was conducted using Leger Marketing’s Web panel between October 25 and 27.

IE