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 in there, letting it sit, treating one of the most powerful financial tools available to Canadians like a slightly fancier chequing account.
Most people weren't taught how any of this works. But if you're in that 41%, there's a real cost to staying there, and it's worth understanding exactly what you're leaving on the table.
The Account Type vs. the Investment: A Critical Distinction
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.
That's a significant advantage. Holding cash earning 2% interest inside a TFSA technically uses that advantage, but only barely. Cash or a High-Interest Savings Account inside your TFSA makes sense for an emergency fund or money you'll need within a year or two. For money with a longer horizon, there's considerably more potential on the table.
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.
Here's the full breakdown of 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.
On the liquidity question: most investments inside a TFSA aren't locked up. ETFs and stocks can generally be sold within a couple of business days. GICs are an exception since those lock your money for a fixed term, but most other investment options inside a TFSA are more accessible than people assume.
On the "not enough saved" concern: there's no minimum to start investing. Many platforms let you buy fractional shares or ETFs with very small amounts. The size of the starting contribution matters far less than the habit and the time in the market.
On not knowing what to choose: that's the most legitimate concern, and worth addressing directly.
What Can Actually Go Inside a TFSA?
Nobody here is going to tell you what to invest in. That depends on your goals, your timeline, your risk tolerance, and your overall financial picture. What's worth explaining is what the options actually are.
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 your money is locked in for the term. Worth considering if you have a specific horizon and 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.
The key variable is your time horizon. 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 Actually Costs You
$10,000 sitting in a TFSA at 2% interest for 20 years grows to roughly $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 roughly $38,700 over the same period. Real returns vary, and past performance doesn't guarantee future results.
Same starting amount. Same time period. The difference is entirely in what the money is doing while it waits.
You can run the numbers on your own balance and timeline with our TFSA calculator.
This isn't an argument for taking on more risk than you're comfortable with. It's a way of making the cost of inaction concrete rather than abstract.
The Confidence Gap Is a Systemic Problem
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%.
This isn't a personal failing. Personal finance isn't taught in most Canadian schools. Financial institutions have historically benefited from complexity. And the sheer volume of conflicting advice online makes it genuinely difficult to know what to trust.
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.
The Bottom Line
A TFSA is one of the best financial tools available to Canadians. It's most useful when the money inside it is actually working. Holding cash in a TFSA isn't wrong, but it's a partial use of something designed to do considerably more.
If you're among the 41% of young Canadians who haven't started investing inside their TFSA, the next step is understanding what you're holding, why you're holding it, and whether a different approach fits your timeline and goals. You don't need to become an expert. You just need to start.
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
