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Savings account and cash are the most popular holdings by far in tax-free savings accounts, according to a survey by Royal Bank of Canada. To RBC and many others, this is a missed opportunity.

Their argument goes along these lines – if you invest in stocks or funds, you get much better value from the tax-free gains of a TFSA than if you used a savings account. This is true. Big bank savings accounts pay roughly 1 per cent these days, while their online competitors offer 2 to 2.8 per cent. Meanwhile, the S&P/TSX composite index made 7.4 per cent annually for the 10 years to July 31 (with dividends included).

RBC’s survey asked participants about the variety of different investments in their TFSAs and 42 per cent said they held savings and cash, 28 per cent included mutual funds, 19 per cent mentioned stocks, 15 per cent said term deposits and 7 per cent said exchange-traded funds.

Ideally, you’d have an abundant emergency fund kept in a separate savings account and a TFSA built on a diversified portfolio of investments with a large helping of stocks or funds. Now, let me introduce you to the real world, where people are barely saving at all. The most recent tally shows our national savings rate is 1.1 per cent, which is alarmingly low at a time when there’s growing talk of a recession ahead.

We need more people to save more money and we shouldn’t care if they do it in a TFSA or elsewhere. Yet RBC headlined the media release for its poll by saying: “Intentions are good, but TFSAs are largely misunderstood: Canadians continue to use TFSAs as savings piggy banks, rather than a powerful investing solution.”

Ideally, use a TFSA for investing. But it’s perfectly OK to keep to use a TFSA to build that all-important block of savings you can use for emergencies.

One more nugget from RBC’s annual survey: For the first time, more participants reported having TFSAs than registered retirement savings plans. Fifty-seven per cent had a TFSA, versus 52 per cent for an RRSP.

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Rob’s personal finance reading list…

Best bank accounts for students

Globe personal finance editor Roma Luciw and I have done a lot of financial literacy sessions on university and college campuses over the years and one of the many points we like to get across is that students should not be paying fees on their bank accounts, as many adults do. Here’s a guide to the best bank accounts for students. Look for accounts that offer unlimited transactions and e-transfers.

Where the bargains are in school supplies

A look at how much it costs to outfit an eighth grader for school at Amazon, Staples and Walmart. Finding the cheapest store can definitely save you a few bucks.

Wondering who worries most about money?

A survey of 3,000 people finds that age and gender – not income – are the big factors in deciding how much people worry about their finances. The biggest worriers are women – more than 75 per cent of women between the ages of 30 and 55 said they worry about outliving their savings.

Straight talk on annuities

Moshe Milevsky, a finance prof at the Schulich School of Business at York University in Toronto, provides a clear, compelling case for annuities. The interview was done for an American readership, but the points about annuities are relevant to everyone thinking about how to create a reliable flow of income in retirement.

Ask Rob

Q: What is your opinion on whether or not it is a good idea to take CPP early while still working? If I was to do this, I would obviously have to pay taxes on the money, but would it be worth it if that money was put into an RRSP, offsetting the taxes?

A: You’d only be delaying taxes by doing this. Taxes would apply on RRSP withdrawals, although possibly at a lower rate than while you’re working. Another consideration is whether your investment returns on the CPP money going into your RRSP would exceed the dollar increase in benefits you’d get by taking CPP at 65 or later. CPP benefits are reduced by 0.6 per cent for each month before age 65. You can start CPP as young as 60.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

How to track down unclaimed bank accounts, life insurance benefits, tax refunds, Canada Savings bonds and more.

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