A recent survey reveals that many young Canadians are opting to keep their money in cash rather than investing it in their tax-free savings accounts (TFSAs). The survey, conducted by TD Bank, indicates that 41% of Generation Z and millennials with TFSAs are not investing their funds. This trend is occurring amid rising living costs and a challenging job market for younger Canadians.

As of last month, the unemployment rate for youth was over 14%, more than double the national average, according to Statistics Canada. The TD survey found that while 60% of young Canadians have TFSAs, a significant portion is not utilizing them for investment purposes. Overall, 65% of Canadians hold a TFSA, but 39% of them are also not investing their funds.

TFSAs were introduced in 2009 to encourage Canadians to save for retirement and other financial goals. These accounts allow individuals to invest in various financial products, including stocks, bonds, and mutual funds, without incurring taxes on the earnings. The Canada Revenue Agency states that Canadians can contribute up to $7,000 to their TFSAs in 2025.

The reluctance to invest among young Canadians is attributed to several factors. Many cite a lack of confidence in their investment knowledge. The TD survey revealed that 22% of young Canadians not investing in their TFSAs feel they do not have enough saved to invest. Another 22% reported uncertainty about which investment products to choose, while 19% expressed a lack of confidence in their investment skills.

Pat Giles, vice-president of saving and investing at TD, warned that keeping cash in a TFSA limits its potential. "Simply parking cash in a TFSA limits its potential and, in some cases, could lead to contribution penalties if used like a regular savings account," he said.

The financial strain on young Canadians is evident. A recent Ipsos poll found that 69% of Canadians are concerned the government will not provide adequate support in the future, with this figure rising to over 70% among younger demographics. Additionally, 46% of respondents in an Angus Reid survey indicated they had to dip into their savings to manage daily expenses.

Diandra Camilleri, an associate portfolio manager, emphasized the importance of financial education regarding TFSAs. She noted that many young Canadians misunderstand the account's purpose, thinking it functions like a traditional savings account. "A lot of younger Canadians have some confusion over the name: tax-free savings account. They’re not really aware that you can invest in that account," she said.

The survey also highlighted that 30% of younger Canadians investing in their TFSAs have invested their entire balance, while 40% have less than $5,000 in cash remaining. Saving for travel and lifestyle experiences is a primary goal for 38% of younger Canadians, while a third are focused on debt repayment.

Experts recommend that young Canadians regularly review their investment strategies and consult financial professionals as their circumstances change. "Life changes, and so should your investment strategy," said Sumaiya Bhula, a senior manager at TD. "Review your TFSA at least once a year or whenever your goals shift. Make sure your mix still works for you and adjust if needed."