A significant financial misstep is preventing younger Canadians from building substantial wealth through their Tax-Free Savings Accounts, according to new research from TD Bank.
The TFSA Investment Gap
While approximately 60 percent of generation Z and millennial Canadians have opened TFSAs, a troubling 41 percent are simply holding cash in these accounts rather than investing the funds. This pattern contrasts with the broader population, where 65 percent of all respondents have TFSAs but only 39 percent aren't investing within them.
The survey, released in November 2025, highlights a critical knowledge gap among younger investors who may not fully understand how TFSAs differ from traditional savings accounts.
Why This Mistake Matters
Simply parking cash in a TFSA dramatically limits its wealth-building potential, explained Pat Giles, vice-president of saving and investing journey at TD. Even small, consistent investments can help Canadians maximize the full tax-free benefits these accounts offer.
Diandra Camilleri, associate portfolio manager at Verecan Capital Management Inc., noted that confusion often starts with the account name itself. Many young people don't realize that TFSAs can hold investments beyond cash savings.
Unlike regular savings accounts that typically offer minimal interest, TFSAs can contain stocks, bonds, mutual funds, ETFs, and GICs, all growing completely tax-free. Contributions use after-tax dollars, and withdrawals occur without penalties, providing greater flexibility than RRSPs.
Overcoming Investment Barriers
The research identified several obstacles preventing younger Canadians from investing. Among those without TFSAs, nearly three-quarters cited lack of knowledge as their primary barrier significantly higher than the 50 percent average across all age groups.
Additional challenges include uncertainty about where to begin (35 percent of gen Z), limited understanding of TFSA benefits (25 percent), and finding investing too complicated (16 percent).
Despite these hurdles, there's encouraging momentum. A quarter of generation Z respondents plan to begin investing within the next year, with 40 percent viewing TFSAs as a simple first step into the investment world.
Financial professionals emphasize the importance of educating young Canadians about how to leverage TFSAs effectively, particularly given the 2025 contribution limit of $7,000 that could be working much harder for their financial futures.
