As the RRSP contribution deadline approaches, many Canadians are debating whether to invest in an RRSP or a tax-free savings account (TFSA). A BMO study has found that many are particularly intrigued by the TFSA.
According to the study, 67% of Canadians have an RRSP and 39% have a TFSA. Despite the greater prevalence of RRSPs, if Canadians were given a limited sum of money to invest, 42% say they would put it into a TFSA, compared with 37% who would put the money in their RRSP.
Asked why they found the TFSA attractive, 36% cited the tax-free aspect of investments held within the account, while 20% liked that they could withdraw funds at any time.
“Whether saving for travel, the purchase of a home, a child’s education or retirement, it’s encouraging to see that Canadians are investing in their future by contributing to TFSAs and RRSPs,” said Serge Pépin, vice-president, investment strategy, with BMO Asset Management Inc. “Both programs play important roles in helping Canadians save and invest in a tax-efficient manner. They complement each other and should be used in unison, so it’s important that investors understand their differences.”