TFSA vs RRSP vs FHSA: Which Account Should You Use First?

Canada offers three powerful registered accounts for saving and investing — the TFSA, RRSP, and FHSA — each with different tax advantages and ideal use cases. Choosing where to put your money first can save you thousands of dollars in taxes over your lifetime. The right answer depends on your current income, marginal tax rate, whether you are buying a home, and your long-term financial goals. Here is a side-by-side breakdown to help you decide which account deserves your dollars first.

The Tax-Free Savings Account (TFSA) accepts after-tax contributions, meaning you do not get a tax deduction when you contribute. However, all investment growth — interest, dividends, and capital gains — is completely tax-free, and withdrawals are also tax-free. There is no income requirement to contribute, and withdrawals do not affect income-tested government benefits like OAS, GIS, or the Canada Child Benefit. The 2026 annual limit is $7,000, and unused room carries forward. The TFSA is ideal for low-to-moderate income earners whose marginal tax rate is below 30%, for emergency funds, and for anyone who wants maximum flexibility since you can withdraw anytime for any reason without penalty.

The Registered Retirement Savings Plan (RRSP) works in the opposite direction: contributions are tax-deductible, reducing your taxable income in the year you contribute. Investment growth is tax-deferred, but withdrawals in retirement are taxed as regular income. Your annual limit is 18% of the previous year's earned income, up to $33,810 for 2026. The RRSP is most powerful when your current marginal tax rate is significantly higher than your expected rate in retirement — typically above 30%. Two special programs make the RRSP useful before retirement: the Home Buyers' Plan (HBP) allows a tax-free withdrawal of up to $60,000 for a first home, and the Lifelong Learning Plan (LLP) allows up to $20,000 for education.

The First Home Savings Account (FHSA), introduced in 2023, is the newest registered account and uniquely combines the best features of both the RRSP and TFSA. Contributions are tax-deductible (like an RRSP), and qualifying withdrawals to buy a first home are completely tax-free (like a TFSA). The annual limit is $8,000 with a $40,000 lifetime maximum. The catch: you must be a first-time home buyer (no home ownership in the current year or the preceding four years), and you must use the funds within 15 years or transfer them to an RRSP. If you qualify, the FHSA is arguably the most tax-efficient account in Canada for its specific purpose.

So which account should you prioritize? If you are a first-time home buyer saving for a down payment, start with the FHSA — no other account gives you both a deduction and tax-free withdrawal. If your marginal tax rate is above 30% and you are not buying a home soon, maximize your RRSP first for the immediate tax savings. If your marginal rate is below 30%, or you want flexible savings you can access anytime, prioritize the TFSA. For most Canadians, the ideal strategy is a combination: fill the FHSA if eligible, use the RRSP to bring your income down to a lower bracket, then direct remaining savings to the TFSA. LazyPlan analyzes your actual income, tax bracket, and goals to calculate the exact optimal allocation across all three accounts — no guesswork required.