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TFSAs were unveiled in the 2008 federal budget but couldn't be set up until Jan. 1, 2009 ((iStock))

About one-fifth of all adult Canadians opened tax-free savings accounts during their first year of operation, new research shows.

By the end of 2009, 4.7 million TFSAs had been opened, according to research firm Investor Economics. The accounts held $15.8 billion.

Most of the money — $11.9 billion — was invested through retail banks, with most of that money in savings accounts and GICs. Very little of the money invested with banks was put into mutual funds, Investor Economics senior consultant Carlos Cardone told CBC News.

"At the retail banks, it was a case of money moving from taxable accounts into TFSAs," Cardone said.

Full-service and discount brokerages held another $3.1 billion in TFSA money. Almost $800 million was invested with financial advisers. 

TFSAs were unveiled in the 2008 federal budget but couldn't be set up until Jan. 1, 2009.

The biggest rush to open a TFSA took place at the beginning of the year. About 2.8 million accounts were set up in just the first three months of 2009.

Canadians 18 and older can put up to $5,000 a year into a TFSA. The contribution is not tax deductible but contributions can grow tax-free and can be withdrawn at any time with no tax owing. 

Average account holds $3,400

Investor Economics data shows that the average TFSA held $3,400 at the year-end. But TFSAs at full-service brokerages held an average $5,240 — clear evidence that TFSA holders at the brokerage firms were more likely to invest in equities and other market-sensitive products that returned more than interest-bearing instruments.

"That reflects the market appreciation during the last three quarters of 2009," Cardone said. Stock markets hit their low point for the year in March before rebounding strongly.  

Many groups lobbied for something like the TFSA because it would allow lower-income seniors to avoid huge clawbacks of their Guaranteed Income Supplement by drawing money tax-free from their TFSAs, rather than from RRIFs, where payouts are fully taxed.

Others noted that TFSAs would be a good idea for those who have maxed out their RRSPs and still want to put aside money for their later years.

At the time the TFSA program was announced, the Finance Department  touted its new program as "the single most important personal savings vehicle since the introduction of the RRSP" in the 1950s.

To get an idea of how popular TFSAs could become in Canada, Britain's Individual Savings Accounts provide one reference point. ISAs have similar rules to TFSAs. They were introduced more than a decade ago in Britain. The latest stats from July 2009 show that 14.2 million ISAs were in force, with 37.5 billion pounds ($60 billion Cdn) invested.  

"We are very much on track to get to that level," said Cardone.