A significant number of Canadians are missing out on the core benefit of their Tax-Free Savings Accounts (TFSAs) by using them as simple cash repositories instead of investment vehicles, according to recent data. A survey from TD Bank found that a staggering 39 per cent of Canadians use their TFSAs primarily to hold cash. Financial experts, including commentator Dale Jackson, argue this is an inefficient use of a powerful registered account, leaving "dead dollars" on the table that could be working harder.
The High Cost of Holding Cash
The fundamental purpose of a TFSA is to shelter investment growth and income from taxation. While holding cash within a TFSA protects any meager interest earned from tax, it fails to leverage the account's true potential. In an environment where inflation can erode purchasing power, cash that is not invested often loses real value over time. By choosing cash over investments like stocks, bonds, or ETFs, Canadians are forgoing the opportunity for compound, tax-free growth that could substantially increase their long-term savings for goals like retirement, a home down payment, or other major purchases.
Smarter Strategies for TFSA Dollars
So, what are the better alternatives for these dormant funds? Financial advisors suggest several pathways depending on an individual's risk tolerance and time horizon. For conservative investors, high-interest savings ETFs (HISAs) or Guaranteed Investment Certificates (GICs) held within a TFSA can offer better returns than standard cash savings while remaining low-risk. For those with a longer timeline and ability to withstand market fluctuations, a diversified portfolio of equity and fixed-income ETFs is a common recommendation. This approach harnesses the market's historical growth while ensuring all dividends, interest, and capital gains accumulate entirely tax-free.
Overcoming Barriers to Investing
The prevalence of cash in TFSAs points to potential barriers, such as a lack of investment knowledge or fear of market volatility. Experts emphasize that starting small and using low-cost, diversified products like robo-advisors or all-in-one asset allocation ETFs can simplify the process. The key takeaway is that any step toward putting TFSA cash to work in a structured investment is an improvement over letting it sit idle. Canadians are encouraged to review their TFSA holdings and consult with a financial advisor to develop a strategy that aligns with their financial goals and turns their "dead dollars" into productive, tax-free assets.
The TD Bank survey, highlighted in commentary published on December 05, 2025, serves as a crucial reminder for account holders to audit their financial strategies. With contribution room cumulative and precious, ensuring every dollar within a TFSA is optimized is a critical component of personal financial management in Canada.
