Canada Revenue Agency: 2 Surprising TFSA Stats You Should Know

If you don’t know how to use your registered accounts properly, you will not draw out their maximum potential. This is why it’s important that you know these 2 TFSA stats.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Unlike the RRSP, the Tax-Free Savings Account (TFSA) hasn’t been around for ages. But it has been around long enough for Canadians to get the hang of it. Unfortunately, many Canadians still don’t understand or realize how powerful the TFSA can be in helping them build their wealth. But the number is steadily growing, and in 2019, there were more TFSA holders than RRSP holders in the country for the first time.

The problem is that just having a TFSA account doesn’t mean that people are using it the right way. Many Canadians aren’t aware of the technicalities that surround the TFSA. This means that they can’t draw out the account’s full potential, or they might get penalized for using it wrong.

The two stats should help you understand the scope of the problem.

The contribution limit

Many Canadians (about one-third) fail to realize that there is a contribution limit. And while the data on it isn’t clear, some people might make the mistake of confusing the contribution limit that has in an RRSP with what they get for a TFSA. Another fact that concerns this issue is that 40% of people don’t know that they can be penalized for over-contribution.

While it’s hard to figure out why so many Canadians are unaware of the basics of the TFSA, it’s easy to understand why people would be tempted to over-contribute. All growth in a TFSA is tax-free, and you can withdraw funds out whenever you want. If someone comes across a very lucrative investment that might double their money in a few years, they may prefer putting it in a TFSA instead of an RRSP to marinate for two or three decades.

And to maximize the benefit, they would want to invest a hefty amount, thus over-contributing and getting penalized.

Not contributing enough

This stat points toward a more widespread problem, and it’s that not everyone is maximizing their TFSAs. The average contribution last year was $5,332. And while it’s a significant step up from 2018 (when it was around $4,800), there is a lot of room for improvement. The usual yearly contribution limit of $6,000 translates into a neat $500 a month.

This is an amount that most families living on or over the average income can come up with. Even families with lower than average income can try and come up with this amount by exercising financial discipline and proper budgeting. It would be hard, but it can help them out a lot in the long run.

The best way to put that $500 saving to use is by investing it. But it would be risky to invest it all in one stock. But even if they can invest $100 every month in a safe stock like Fortis (TSX:FTS)(NYSE:FTS), they can end up with a $67,000 nest egg in two decades if the company keeps up its 10-year compound annual growth rate (dividend-adjusted) of 9.33%.

Fortis is just one example of decent, safe stock. There are many others, but it’s a stock that even people who don’t actively invest can understand. As a utility stock, its revenues are relatively safe even during market downturns. It has a very dependable income source (utility consumers), and the company has a stellar dividend history.

Foolish takeaway

A stock like Fortis in your fully stocked TFSA can be a powerful tool – and not only for your retirement. Since you can withdraw tax-free income from your TFSA whenever you want, it can be a great place to build up your emergency reserves and nest eggs. But it’s important to understand what a TFSA can and can’t hold, and the fact that it is for long-term investments and not short-term trading.

Should you invest $1,000 in Fortis right now?

Before you buy stock in Fortis, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fortis wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $5,000? 5 Income Stocks to Buy and Hold Forever

These income stocks have a solid dividend-payout history that can help you earn stress-free passive income.

Read more »

grow money, wealth build
Dividend Stocks

Why I’d Invest $10,000 in This Undervalued Dividend-Growth Stock for Decades of Income

This undervalued dividend stock offers a high yield of over 8% and can help you earn more than $200 in…

Read more »