TFSA vs RRSP vs FHSA: Which Account First? (2026)
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Canada gives you three main tax-sheltered accounts. They’re not investments themselves: they’re containers. Inside any of them you can hold savings, GICs, ETFs or stocks, depending on where you open it.
The short version
| TFSA | RRSP | FHSA | |
|---|---|---|---|
| Contribution lowers your taxes now? | No | Yes | Yes |
| Withdrawals taxed? | No | Yes (as income) | No, if used for a qualifying first home |
| 2026 new room | $7,000 | 18% of 2025 earned income, max $33,810 | $8,000 a year, $40,000 lifetime |
| Who can open one | Resident, 18+ with a SIN | Anyone with earned income (and a SIN) | Resident, 18+, first-time home buyer |
| Withdraw and re-contribute? | Yes, room comes back next January 1 | No, room is lost | No |
Limits from the Canada Revenue Agency. Your personal room is in CRA My Account; check it before contributing, because over-contributions are taxed every month.
TFSA: the flexible one
You put in money you’ve already paid tax on. Everything it earns, and every withdrawal, is tax-free. Room builds up every year from age 18 even if you never open an account, so someone who has been an adult resident since 2009 has $109,000 of total room in 2026.
Good for: an emergency fund, a goal in the next few years, or long-term investing if your income is modest.
RRSP: the tax-refund one
Contributions are deducted from your income, so you get a refund at your marginal tax rate. You pay tax when you withdraw, ideally in retirement when your income (and tax rate) is lower. Through the Home Buyers’ Plan you can borrow up to $60,000 from your RRSP for a first home and repay it over 15 years.
Good for: middle and higher incomes, where today’s deduction is worth more than the tax you’ll pay later.
FHSA: the first-home one
The First Home Savings Account combines the best of both: contributions are deductible like an RRSP, and a qualifying home withdrawal is tax-free like a TFSA. You count as a first-time buyer if you haven’t lived in a home you or your spouse owned in the current year or the previous four.
If you never buy, you can move the balance into your RRSP without using RRSP room. Unused FHSA room carries forward, but only up to $8,000, so opening the account early starts the clock even if you can’t fill it.
A simple order of priority
- Planning to buy a first home? Open an FHSA now, even with a small amount.
- Employer matches RRSP contributions? Contribute enough to get the full match. It’s free money.
- Income under roughly $55,000? Favour the TFSA. The RRSP deduction is worth less, and RRSP withdrawals can reduce income-tested benefits in retirement.
- Higher income? Lean on the RRSP, and put the refund into your TFSA.
This is a general framework, not advice for your situation. A fee-only planner can run your actual numbers.
Where to open them
Banks offer all three, but often only with savings or GICs and mutual funds with higher fees. Online brokers let you hold low-cost ETFs inside the same accounts.
Whichever you pick, investments at a member firm of the Canadian Investment Regulatory Organization are protected by the Canadian Investor Protection Fund if the firm fails. That protects you against the firm going under, not against the investments losing value.