Tax-free savings accounts (TFSAs) are super popular in Canada, but that may just be from great branding. Sure, we all try to not judge a book by its cover, but what about judging a bank account by its name? A gaggle of Canadian researchers found that people tend to choose a savings plan just because it’s labelled as “tax-free,” even if another option might actually be better for their unique financial situation. In the researchers’ experiments, they gave folks a choice between a "tax-free account" or a "retirement savings account," with descriptions that varied in accuracy. Turns out, most people went for the plan labelled "tax-free," regardless of what the plan description said. These findings line up with what we are seeing in Canada: Even though registered retirement savings plans (RRSPs) have been around for about 50 more years, have higher annual limits, and give tax breaks on contributions, they are less popular. In 2020, TFSAs held 51.8% of Canadian families' savings, while RRSPs only had 31.5%. So make sure to closely evaluate which option is best for you.