Alternative Investments To RE – Canadians Know Less Than Monkeys About TFSAs

For many Canadians, real estate is their best investment. There are three reasons for that:  (1.) We’ve just been through an extraordinary bull-become-bubble up-leg in RE, (2.) there is forced leverage inherent in RE ownership (which works spectacularly well through up-legs) and, (3.) for many, RE is their only investment of any consequence.  As a group, ‘Boomers’ are outrageously overdependent on their RE holdings, and there is a dire need for the entire population to become more savvy with regard to other options for saving and investing. Tax-free savings accounts (TFSAs) were introduced more than a year ago and very widely publicized. A survey conducted in December 2009 shows Canadians woefully ignorant of this useful instrument. A group of monkeys throwing darts at the answer-sheet would have scored an average of 50% on this true/false quiz. A group of 1,506 Canadians scored an average of 41%. -vreaa

The Monkey Huts

Excerpts from ‘Canadians fail TFSA test’, The Globe and Mail, 18 Feb 2010

A Mackenzie Investments TFSA test, conducted in December by Leger Marketing, asked 1,506 adult Canadians five basic true or false questions about Canada’s newest investment account. Of those polled, 44 per cent answered three or more correctly, 8 per cent answered all five questions correctly and 28 per cent got them all wrong. … 68 per cent of respondents haven’t opened a TFSA. When asked why, 59 per cent cited a lack of money while 42 per cent said it’s because they don’t know enough about them.

Here are the five true or false questions in the Mackenzie survey. [% indicates how many respondents answered correctly]

1. Like an RRSP, contributions to a TFSA are tax-deductible. [43%]
2. The TFSA contribution limit is currently $5,000 per year. If you don’t contribute the full $5,000 in a year, the remaining contribution room is lost. [
3. TFSA contribution room does not depend on earned income. Regardless of income level, all Canadians age 18 or older will receive $5,000 of TFSA contribution room each year. [
4. A broad range of investment options are available within a TFSA including stocks, bonds and mutual funds. [
5. An individual can own multiple tax-free savings accounts. [

See here for the answers.

[Our post headline is intentionally waggish: This is a classic case of a little bit of knowledge being a bad thing. -vreaa]

One response to “Alternative Investments To RE – Canadians Know Less Than Monkeys About TFSAs

  1. horray I got all 5, though I wasnt certain about #5 (and apparently neither was anyone else).

    It is a bit of a shame that the banks don’t educate you on the options. I went to my bank last year and opened one up and didn’t even get asked what I wanted to put the money in. They just dropped it in a 1% savings account. A few months later I transfered it out of there when I found a better mutual fund style place to put it. The crappy thing is, they charged me something like $50 to move the money so I actually lost money on the few months it was in there. And banks wonder why people don’t like them.

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