Thirty-two per cent of Canadians do not understand the difference between TFSAs and RRSPs, according to BMO's TFSA vs. RRSP report released Feb. 21.
The survey, conducted by Pollara Strategic Insights also showed that more than half of Canadians would choose a TFSA over an RRSP. For Baby Boomers this preference is clear. Sixty-nine per cent of those 55 and over say they would pick a TFSA over an RRSP.
Fifty-six per cent of Millennials said they do not have an RRSP account, according to the report, whereas 67 per cent of Generation Xers and Baby Boomers say they do have an RRSP.
Using TFSAs for discretionary purchases
Mathieu Lepine, Head, Term Investments at BMO, said Baby Boomers have been consistently good, long-term savers, which could explain why they’re turning to TFSAs. Baby Boomers who have built up their RRSPs can use TFSAs to enhance their lifestyle and for discretionary purchases.
“It’s a positive indicator to see Canadians flocking to TFSAs – the savings vehicle provides a good amount of flexibility. Leveraging both accounts simultaneously can provide even greater value over the long term. As Millennials start earning more and turn their minds towards retirement, RRSPs will nicely supplement what is being built up in the TFSA,” he adds.