- Basic monthly living expenses have increased by $397, on average, year-over-year according to
respondents
- 68 per cent say their finances have been negatively impacted
by economic conditions
- TFSA account balances increased 9 per cent from 2022 to
2023, among those surveyed
TORONTO, Jan. 18,
2024 /CNW/ - The latest BMO Annual Investment
Survey reveals Tax-Free Savings Account (TFSA) usage has
declined from last year as most Canadians (68 per cent) say current
economic conditions are negatively affecting their finances. The
survey data indicates TFSA usage is around 62 per cent, down from
66 per cent last year and below the 2018 peak of 69 per cent.
BMO Annual Investment Survey Highlights:
- Increased Cost of Living: Basic monthly living
expenses have increased by $397
year-over-year, on average, among those surveyed.
- Budgeting: More than half of Canadians are spending
less on discretionary items: eating out (57 per cent), travel (53
per cent) and clothing (53 per cent).
- Prioritizing Debt Management: Paying off debt is a
primary reason almost one quarter of Canadians (24 per cent) are
not investing this year. Millennials (ages 28 to 44) are the
generation most focused on paying off debt rather than investing
(42 per cent).
"Despite rising costs of living and other economic challenges,
Canadians who can, should continue to make investing a priority,"
said Nicole Ow, Head, Retail Investments, BMO. "Among the
benefits of investing in a TFSA is the ability to withdraw funds at
any time should those funds be needed. This flexibility makes the
TFSA an excellent investment vehicle, especially during times of
economic uncertainty. Over the years, investors using the TFSA have
been rewarded with tax-free returns, helping many Canadians achieve
greater progress towards their financial goals."
TFSA balances on the
rise
Of those with a TFSA, the survey indicated overall balances are
on the rise, increasing 9 per cent to $41,510 in 2023. According to the survey, the
total amount Canadians have in their TFSA has risen steadily over
the last six years:
Mean TFSA Account Balances
2023
|
$41,510
|
2022
|
$38,046
|
2021
|
$34,917
|
2020
|
$30,921
|
2019
|
$28,214
|
2018
|
$27,053
|
For those planning to make TFSA contributions, 19 per cent plan
to contribute more money this year, 26 per cent plan to contribute
less, 46 per cent plan to contribute the same amount and 9 per cent
were unsure. Gen Z (ages 18 to 27) are the most likely among the
generations to increase contributions, with 33 per cent planning to
put more into their TFSA this year.
The latest research also shows that while 53 per cent of TFSA
owners hold investments in their account, the remaining 47 per cent
have their savings in cash and could be missing out on
opportunities for enhanced tax-free growth. TFSAs offer Canadians
investment options beyond a savings account, and various other
investments beyond cash can be held in a TFSA such as GICs, mutual
funds, ETFs, stocks, and bonds.
Despite current economic
conditions, some relief may be on the way
While most Canadians say the economy is negatively affecting
their finances, improving economic conditions overall may pull the
country back from the brink of a recession or mute its severity,
according to BMO Economics. Additionally, while consumer spending
will likely remain flat throughout the rest of the winter, BMO
Economics says expected interest rate reductions in the near future
may help ease the current economic environment.
"The results from this survey are understandable given
prevailing economic conditions," said Robert Kavcic, Senior Economist, BMO. "Household
debt is historically high, inflation has lifted day-to-day cost
pressures, and high interest rates make paying down debt a
compelling option that might be crowding out some new investment.
But on a positive note, easing financial conditions into 2024
should support the economy, and expected rate cuts from the Bank of
Canada starting in the summer
would only help."
For more information about BMO's Tax-Free Savings Accounts
(TFSAs), please
visit: bmo.com/main/personal/investments/tfsa/.
Methodology
This study was conducted by Pollara Strategic Insights via an
online survey of 1,510 adult Canadians, between November 3rd – 8th, 2023. The margin of error for
a probability sample of this size is ± 2.5%, 19 times out of
20.
About BMO Financial
Group
BMO Financial Group is the eighth largest bank in North America by assets, with total assets of
$1.3 trillion as of October 31, 2023. Serving customers for 200 years
and counting, BMO is a diverse team of highly engaged employees
providing a broad range of personal and commercial banking, wealth
management, global markets and investment banking products and
services to 13 million customers across Canada, the United
States, and in select markets globally. Driven by a single
purpose, to Boldly Grow the Good in business and life, BMO
is committed to driving positive change in the world, and making
progress for a thriving economy, sustainable future, and inclusive
society.
SOURCE BMO Financial Group