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Six years after TFSAs were introduced, many clients still don’t understand how they work, finds a survey by Mackenzie Investments.

Canadians are still not familiar with the basic elements of the program, meaning they risk not using their accounts to the fullest.

Read: TFSA designations may cause estate problems

Mackenzie asked people five true-or-false questions about how TFSAs work, and 51% answered three or more correctly. That’s only slightly better than the results from the 2009 survey, when 44% answered three or more correctly.

“In five years Canadians still have misunderstandings about the basics of the program,” said Carol Bezaire, vice president Tax and Estate and Strategic Philanthropy for Mackenzie Investments. “For example, many people don’t realize you can hold TFSA’s outside of banks and the accounts can hold a broad range of investment options such as stocks, mutual funds and bonds.”

Read: Help clients build better financial plans

Among those who don’t have a TFSA, 64% say it’s because they don’t have money to invest, followed by 26% who say they don’t know enough about TFSAs.

The five questions Mackenzie asked those surveyed are below. Ask your clients to gauge how much they really know about TFSAs.

  1. Like an RRSP, contributions to a TFSA are tax deductible. (False.)
  2. The TFSA contribution room is $10,000 a year. If you don’t contribute the full $10,000 a year, the unused amount can be carried forward. (True.)
  3. TFSA contribution room doesn’t depend on earned income. All Canadians can contribute up to $10,000, regardless of income. (True)
  4. A range of investment options are available within a TFSA, including stocks, bonds, and mutual funds. (True.)
  5. An individual can own multiple TFSAs. (True.)

Read: Clients confused about TFSA rules

Originally published on Advisor.ca

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