Slow uptake for FHSAs among advisors leads to missed opportunity to connect with the next generation.
Updated: 3 hours ago
Original article by:
Kelsey Rolfe
The Globe & Mail
May 6, 2024
📰 Read the FULL ARTICLE here.
I spoke with The Globe and Mail about the slow start for first home savings accounts (FHSAs) and who is actually using them. Here are the highlights and my contributions.
Key Takeaways
Billions of dollars flowed into FHSAs in their first year, but that was well below early expectations, partly because many providers were slow to launch the accounts.
Clients of financial advisors and full-service brokerages held only a small share of FHSA assets. Most sat with bank branches, followed by online brokerages.
Prospective first-time buyers can contribute up to $8,000 a year, to a $40,000 lifetime limit, over the account's 15-year lifespan.
Unused FHSA funds can be moved tax-free into an RRSP or RRIF, or withdrawn as taxable income.
More than half of FHSA money is sitting in deposit accounts rather than being invested.
My Perspective
I'm not seeing much interest in FHSAs among my mostly millennial clients. Those saving for a home tend to prioritize their TFSA because it gives them the flexibility to use the money for something else if their plans change. Some clients simply don't have spare cash for another account. Where I am seeing interest is among more affluent clients who have already maxed out their other registered accounts and see the FHSA as a way to add to their RRSP room.
"Those who may need these incentives more are not the ones taking advantage."
If you do open an FHSA, put the money to work. If you plan to buy within the next couple of years, a high-interest savings account inside the FHSA makes sense, and if you're at least a year away, a GIC can be a good fit. Leaving a down payment sitting in a chequing account means it isn't growing at all.
"If it's sitting in a chequing account, you're not getting anything – you're losing to inflation."
Originally published in The Globe and Mail by Kelsey Rolfe on May 6, 2024. Use the link at the top of this post to read the full article.
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