As the year draws to a close, it's time to take stock of your Tax-Free Savings Accounts (TFSAs). Surprisingly, despite the popularity of TFSAs across Canada—28.2 million existing accounts by 2022—many of these accounts are being left unattended. The situation is alarming; a staggering 14.3 million TFSAs had no transactions at all in the same year.

The reasons for this phenomenon can vary widely. Many Canadians are grappling with financial challenges that push their TFSA contributions to the bottom of their list of priorities. However, this isn't just a matter of scarce funds. It seems that an increasing number of individuals are opening TFSAs only to forget about them entirely, effectively creating a category known as "TFSA orphans."

In 2022 alone, 17.8 million Canadians held a TFSA, yet close to 8 million had not contributed to theirs. An additional concern arises from the fact that 2.3 million people own three or more TFSAs, while the average number of TFSAs per individual is only 1.6. Managing multiple accounts can be challenging, leading to confusion over contributions and withdrawals, and ultimately inadequate portfolio management.

As we approach the end of the year, it’s crucial to avoid the trap of neglecting these accounts. Here are some key recommendations to act on now:

1. Designate a Beneficiary:

If you haven’t already, make sure to choose a successor holder or beneficiary for your TFSA. This will provide peace of mind for you and financial security for your loved ones.

2. Maximize Your Contribution Room:

Each year provides new room for tax-free contributions. Ensure you are taking full advantage of this opportunity.

3. Consider Planned Withdrawals:

Instead of holding off until the new year, think about making any necessary withdrawals now. This could free up contribution room for next year, allowing for more strategic financial planning.

4. Address Your Orphan TFSAs:

Take the time to evaluate your neglected accounts. Either dedicate effort to manage them properly or consider closing them if they no longer serve a purpose in your savings strategy.

Interestingly, in 2022, 1.5 million TFSAs were closed as individuals sought to tidy up their financial situations or settle estates—while a countering 3.1 million new TFSAs were opened. This striking contrast signals a clear challenge: if you are among those who recently opened a TFSA, make a commitment to actively manage it. The last thing we need is for the number of TFSA orphans to keep climbing.

As 2023 winds down, don’t let your TFSAs become lost in the shuffle. Take control, make those accounts work for you, and enjoy the benefits of tax-free growth!