41% of Young Canadians Are Missing the Point of Their TFSA
A TD Bank survey from November 2025 found that 41% of Gen Z and Millennial Canadians with a Tax-Free Savings Account aren't investing the money inside it. They're parking cash there and using one of the strongest tax-advantaged accounts available to Canadians as a slightly fancier chequing account.
Most people weren't taught how this works. If you're in that 41%, the cost of staying in cash compounds over years, and the gap between cash and invested is bigger than most people would guess.
TFSA vs. the Investment Inside It
The name is part of the problem. "Tax-Free Savings Account" sounds like a savings account. So people open one, move some money in, feel responsible about it, and move on.
A TFSA is an account type, a container, that can hold a wide range of investments: cash, stocks, bonds, ETFs, GICs, and mutual funds. Any growth that happens inside the TFSA, whether dividends, capital gains, or interest, stays with you entirely. The CRA takes none of it.
The advantage is significant, but cash earning 2% inside a TFSA barely uses it. A High-Interest Savings Account inside your TFSA works for an emergency fund or money you'll need within a year or two. For anything longer, the cash version leaves most of the TFSA's value unused.
How Much Contribution Room Do You Have?
The annual TFSA contribution limit for 2026 is $7,000. Contribution room accumulates from the year you turned 18, or from 2009, whichever is later, since that's when TFSAs launched in Canada. Unused room carries forward indefinitely, and if you make a withdrawal, that room is restored the following January 1st.
Annual limits and cumulative room for someone eligible since 2009:
| Year | Annual Limit | Cumulative Room |
|---|---|---|
| 2009 | $5,000 | $5,000 |
| 2010 | $5,000 | $10,000 |
| 2011 | $5,000 | $15,000 |
| 2012 | $5,000 | $20,000 |
| 2013 | $5,500 | $25,500 |
| 2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
| 2017 | $5,500 | $52,000 |
| 2018 | $5,500 | $57,500 |
| 2019 | $6,000 | $63,500 |
| 2020 | $6,000 | $69,500 |
| 2021 | $6,000 | $75,500 |
| 2022 | $6,000 | $81,500 |
| 2023 | $6,500 | $88,000 |
| 2024 | $7,000 | $95,000 |
| 2025 | $7,000 | $102,000 |
| 2026 | $7,000 | $109,000 |
Someone who has been eligible since 2009 and has never contributed has $109,000 in available room in 2026. Most people are somewhere in between. Checking your exact available room through CRA My Account is the most accurate way to know where you stand.
Why People Aren't Investing Inside Their TFSA
The TD survey asked people why they were leaving their TFSA as cash. The top answers:
27% wanted their money readily available.
22% felt they hadn't saved enough to start investing.
22% didn't know what investment products to choose.
19% didn't feel confident in their investment knowledge.
Liquidity tends to be less of a barrier than people expect. Most TFSA investments aren't locked up; ETFs and stocks can generally be sold within a couple of business days. GICs are the exception, since they lock your money for a fixed term.
Investing has no minimum, despite the perception. Many platforms let you buy fractional shares or ETFs with very small amounts, and the size of the starting contribution matters far less than the habit and the time in the market.
Not knowing what to choose is the most legitimate of the four concerns, and worth addressing directly.
What You Can Hold Inside a TFSA
Specific investment choices depend on your goals, timeline, risk tolerance, and overall financial picture. The three most common starting points are ETFs, GICs, and cash.
ETFs (exchange-traded funds) are a common starting point for people who want a simple, low-maintenance approach. An ETF is a basket of securities, such as stocks or bonds, that trades on a stock exchange. A broad index ETF tracks something like the S&P 500 or the S&P/TSX Composite, giving you exposure to hundreds of companies in a single purchase. Management fees are typically very low.
GICs (Guaranteed Investment Certificates) offer a fixed return for a fixed period. Lower risk, lower potential return, and locked in for the term. They suit savers with a specific horizon who want something predictable.
Cash or a High-Interest Savings Account inside a TFSA works well for an emergency fund or money earmarked for a near-term purchase like a down payment within the next year or two.
Time horizon decides which of these makes sense. Money you won't need for a decade or more has time to recover from market fluctuations. Money you might need in 18 months probably shouldn't be exposed to that kind of volatility.
What Leaving It in Cash Costs You
$10,000 sitting in a TFSA at 2% interest for 20 years grows to $14,900.
The same $10,000 invested in a broad market index fund at a 7% average annual return, a historically reasonable assumption for a diversified portfolio over the long run, grows to $38,700 over the same period. Real returns vary, and past performance doesn't guarantee future results.
The starting amount and time period are identical. The difference is whether the money is invested or sitting in cash.
You can run the numbers on your own balance and timeline with our TFSA calculator.
The point of these numbers is to make the cost of inaction concrete. Risk comfort varies, and the right level of investment exposure depends on your circumstances.
Why Most Canadians Aren't Taught Personal Finance
40% of Gen Z Canadians say they don't feel confident knowing when to use a TFSA versus an RRSP. Among Gen Z Canadians without a TFSA, nearly three-quarters cited a lack of knowledge as their biggest barrier, significantly higher than the national average of 52%.
The knowledge gap reflects structural choices. Personal finance isn't part of most Canadian school curricula, financial institutions have historically benefited from complexity, and the volume of conflicting advice online makes trustworthy sources hard to identify.
Starting before you feel fully ready is almost always better than waiting. A small amount in a simple, diversified investment inside your TFSA beats perfect knowledge that arrives too late. If you want guidance specific to your situation, a fee-only financial planner charges a flat fee for advice and has no financial incentive tied to what products you buy.
Where to Go From Here
A TFSA is one of the best financial tools available to Canadians, and it earns its full value when the money inside is invested. Holding cash inside a TFSA is a partial use of something designed to do more.
If you're among the 41% of young Canadians who haven't started investing inside their TFSA, the next step is to look at what you're holding, what your time horizon is, and whether a different mix would suit your goals. A small amount in a simple, diversified investment is enough to start; starting matters more than starting with the right answer.
Sources
TD Bank: Risking No Returns? TFSA Growth Survey, November 2025 Government of Canada: What Is a TFSA (CRA) Government of Canada: Calculate Your TFSA Contribution Room Questrade: How to Invest in Index Funds in Canada
