TFSA vs RRSP vs FHSA: Which Should You Fund First?
Buying a first home? FHSA first — it's the only account with a deduction going in and tax-free withdrawals coming out. Otherwise: RRSP if your tax rate is high now and lower in retirement, TFSA if it isn't, or if you might need the money back.
All three accounts shelter your investments from tax while the money is inside. The difference is when you pay tax — and that's the whole decision.
Side by side
| TFSA | RRSP | FHSA | |
|---|---|---|---|
| Tax deduction on contribution | No | Yes | Yes |
| Tax on withdrawal | None, ever | Taxed as income | None (for a first home) |
| Room restored after withdrawal | Yes, next Jan 1 | No | No |
| Annual limit | $7,000 | 18% of income (max $32,490) | $8,000 |
| Lifetime limit | None | None | $40,000 |
| Repayment required | No | Only under the HBP | No |
| Best for | Flexibility, lower brackets | High earners deferring tax | First-time home buyers |
The order that works for most people
- Any employer RRSP match — a 50–100% instant return, and the one thing that beats everything else on this list.
- FHSA, if you might buy a first home. Check the numbers with the FHSA calculator.
- High-interest debt. Nothing here beats clearing a 20% credit card — the card payoff calculator shows why.
- TFSA or RRSP, decided by your marginal rate. Find yours with the income tax calculator, then size a contribution with the RRSP calculator or check your room with the TFSA calculator.
- RESP, if you have kids — the government adds 20%. See how much with the RESP calculator.
What to hold inside them
The account is the wrapper; what you put in it still matters. Long-horizon growth investments benefit most from tax shelter — see what regular contributions become with the compound interest calculator, or model dividend income with the dividend calculator. For short-term money you can't risk, a GIC inside a TFSA keeps the interest tax-free — just check the rate is beating inflation.
Frequently asked questions
Should I contribute to a TFSA or RRSP first?
Compare your tax rate now against the rate you expect in retirement. If you're in a high bracket today, the RRSP deduction is worth more, so fund it first. If you're early-career or in a lower bracket, the TFSA usually wins — you pay tax now at a low rate and never again.
Is the FHSA better than the RRSP Home Buyers' Plan?
For most first-time buyers, yes. Both give you a deduction, but an FHSA withdrawal for a home is permanently tax-free and never has to be repaid. A Home Buyers' Plan withdrawal must be repaid to your RRSP over 15 years or it's added to your taxable income.
Can I use all three accounts?
Yes, and many people should. They serve different purposes: the FHSA for a first home, the RRSP for retirement tax deferral, and the TFSA for everything flexible. You can also contribute to an FHSA and use the Home Buyers' Plan for the same purchase.
What happens to my FHSA if I never buy a home?
You can transfer the full balance — contributions and growth — into an RRSP or RRIF tax-free, and it doesn't use up any RRSP contribution room. That makes an FHSA close to risk-free even if your plans change.
Researching and writing about Canadian personal finance since 2026.
Last reviewed August 2026 · How we research
“TFSA vs RRSP vs FHSA: Which Should You Fund First?” — VaultNerd, https://www.vaultnerd.com/learn/tfsa-vs-rrsp-vs-fhsa, updated August 2026.
- CRA — TFSA, RRSP and FHSA contribution rules and limits
- CRA — Home Buyers' Plan repayment requirements