Last updated on December 1, 2025.
Every February, Canadians start asking themselves the same question. When’s the Family Day holiday? Just kidding! It’s more likely that we’re asking when the RRSP deadline is. Or more specifically: Should I put money in an RRSP? Or a TFSA? What even is an FHSA? And which one is best?
Take a deep breath. The truth is, there’s no “best” account for everyone, just the one that fits your goals, income, and how soon you’ll need the cash.
So, let’s unpack it like three contestants on a financial game show: Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), and First Home Savings Account (FHSA). Each has its own perks, quirks, and fine print. Sophie Salcito, a Wealth Advisor at Vancity and Aviso Wealth, weighs in on where you should put your money.
What’s new for 2026?
There are a few things you want to know in 2026 when it comes to RRSPs, TFSAs, and FHSAs. Here’s what’s new:
- TFSA: You can add another $7,000.
“You should use your 2024 Tax Notice of Assessment to see the RRSP room you have accumulated,” says Sophie. “You’ll need to keep track of your TFSA room or speak to an advisor, as the Canada Revenue Agency (CRA) website may not have the most current information. For the FHSA, you can still contribute your past years’ room of $8,000/year, but only if you a plan opened then. If you are just starting and opening a new FHSA, then your max for the year you open it will be $8,000.”
RRSP: The tax-break classic.
An RRSP is a retirement savings account with tax advantages. It allows your contributions to grow tax-deferred until withdrawal. An RRSP is steady, a bit rule-bound, and essential for your future self.
Why people invest in RRSPs:
- RRSPs are good for lowering taxes: Every dollar you contribute reduces your taxable income.
- RRSPs provide retirement growth and tax-deferred savings: Your investments grow quietly in the background, untouched by the tax man until you withdraw them.
- Home and education perks: You can use up to $60,000 to purchase your first home through the Home Buyers’ Plan (HBP), but any funds withdrawn must be paid back to your RRSP over the next 15 years. In addition, You can withdraw up to $20,000 for education through the Lifelong Learning Plan.
- FHSA transfer: You can shift funds directly from your RRSP to your FHSA if you’re switching your focus from retirement to real estate.
“Your FHSA must be used for the purchase of a principal residence (to be tax-free), so you should draw that out first,” says Sophie. “Unlike the HBP, you won’t have to pay the money back to your RRSP. Then, you can assess if you need all or some of your RRSP savings to complete a purchase.”
Sophie’s expert money-saving advice is to “look at some long-term growth for a portion of the funds if you’re a few years away from a purchase. The market returns can potentially help you grow the money faster, just be sure to get advice on a good risk mix for you.”
Sophie has clients who started saving in a TFSA in 2009, the year of inception. “Some of them have over $200,000 saved now because they did market-based investments each year and haven’t withdrawn any of the savings,” she added.
The fine print of RRSPs:
- If you want to withdraw early, then prepare for tax pain. Unless it’s for school or to purchase a home, that money counts as income.
- Once it’s out, it’s out. You can’t recontribute that same room later.
- Withdrawals aren’t tax-free. Expect withholding taxes if you dip in early.
TFSA: The cool, flexible one.
A TFSA is a registered savings plan where your investment income and withdrawals are tax-free. Your TFSA doesn’t judge. It’s happy to hold your rainy-day fund, your travel savings, or your “someday I’ll start a side business” stash, all tax-free.
Why people like to use TFSAs:
- Tax-free everything: Growth, withdrawals, and reinvestments are all yours to keep.
- Use it for anything: Retirement, renovations, or an emergency vet bill.
- Withdraw whenever: You get that room back next year, no questions asked.
- It won’t mess with your government retirement benefits: TFSA withdrawals don’t affect things like Old Age Security or your Guaranteed Income Supplement.
When juggling short-term goals and long-term plans, the saving strategy you go with depends on your personal situation. “A good rule is to look at your income tax bracket and annual income,” says Sophie. “If you’re in a higher income tax bracket, an RRSP contribution may make the most sense, as you’re getting a higher income tax refund by putting money in it. Then you can take the income tax refund and use that money to compound your savings by adding it again to your RRSP to generate another income tax refund or use it to pay off debt.”
When juggling short-term goals and long-term plans, the saving strategy you go with depends on your personal situation.
Sophie says for those in a lower or moderate income tax bracket, a TFSA may be your best choice. “It doesn’t give you an income tax refund but provides you with more readily accessible funds in case of emergency.”
Sophie’s money-making tip is “if you think your income will increase in a few years, save the RRSP room and contribute to your TFSA. Then make a TFSA withdrawal (tax-free) and add to your RRSP when you are in a higher income tax bracket to get yourself a higher tax refund.”
The fine print of TFSAs:
- No tax break upfront: Unlike RRSPs, contributions don’t lower your taxable income.
- It can be tempting to raid: It’s there, it’s liquid, and suddenly it’s gone. Like potato chips at midnight.
- Don’t over-contribute: The CRA will slap you with a one per cent monthly penalty on the excess.
FHSA: The new kid with the biggest tax flex.
An FHSA is an account that combines the tax benefits of an RRSP with the flexibility of a TFSA. It allows first-time homebuyers to make tax-deductible contributions into a savings account and withdraw it tax-free for a first home.
If buying your first home feels impossible, the FHSA is here to give you hope alongside a nice tax break.
Why people like the FHSA:
- Tax wins times two: Contributions are tax-deductible, and withdrawals for a first home are tax-free.
- No repayment required: Unlike the RRSP’s Home Buyers’ Plan, you don’t have to pay the money back.
- Roll it over: If you don’t use it for a house, simply transfer it to your RRSP or Registered Retirement Income Fund (RRIF). No penalty.
Sophie says couples saving for a first home can double-up on the FHSA. “If you’re a couple and you’ve never owned a principal residence and want to save for one, then you both should try to maximize and save $8,000 a year (up to $40,000 lifetime) into each FHSA.”
The limitations:
- The FHSA is only for first homes: If you’ve owned before, you won’t qualify—except for folks who have waited for a certain qualifying period. If you’re buying with a partner, only the person who meets the first time home buyer rules can open and contribute to an FHSA.
- Use it or lose it: You’ve got 15 years from opening (or until you turn 71) before it has to close.
- Don’t overcontribute: A one per cent monthly penalty applies.
- You can’t use an FHSA to purchase a rental property. The home must be your principal residence.
Life stage guide: where to put your money depending on your age.
Sophie’s advice for where to put your money changes depending on your personal situation.
One example she gave is of a client who’s still working at 69 years old. Sophie helped them open an FHSA at age 66. “They didn’t own a principal residence, so I set them up with an FHSA and their $8,000/year contribution got them an income tax deduction for $8,000,” says Sophie. “That gets them a refund of about $2,500 based on their tax bracket.”
Once they turn 71, they’ll roll their savings into an Retirement Income Fund (RIF), which will be part of their retirement savings for later. “This FHSA created additional tax deductions for them and additional retirement savings. Sometimes you have to look at the specific rules of each plan and see what’s possible for each person,” says Sophie.
- RRSPs are ideal if you’re focused on retirement savings and currently in a high tax bracket.
- TFSAs offer flexibility and tax-free growth, making them a great choice for short-term goals or if you anticipate a high-income during retirement.
- FHSAs are perfect for first-time homebuyers looking to save for a down payment while enjoying tax benefits.
In your 20s or 30s:
Start with your FHSA if homeownership is on your radar. It’s basically a government-approved cheat code. Pair it with a TFSA for flexibility.
“For first-time savers or homebuyers starting from scratch, I always want people to know that every amount you can save makes an impact,” says Sophie. “No amount is too small, so try to pay yourself first and after each paycheque arrives, move a set amount to a tax sheltered savings vehicle like a TFSA, FHSA, or RRSP.”
In your 40s or 50s:
Max out your RRSP if you’re earning more. Future you will thank you (both the future you that pays taxes that year and the future you that needs money in retirement). Keep a TFSA for emergency funds or investments you might need to tap early.
Sophie says for mid-career Canadians juggling mortgages, kids, and retirement savings, the best thing you can do is make saving automatic. “Take it from yourself automatically via a monthly or biweekly contribution to your RRSP,” says Sophie. “If you get a salary increase, that also means you need to increase the amount you save.”
If you’re in the groove of making regular RRSP contributions, you might end up with a nice tax refund. You can use that refund for another goal, like adding to your children’s Registered Education Savings Plan or putting it back into your RRSP for another refund the next year.
Sophie also says not to underestimate the power of compound savings. “You’re the one who’ll need to prioritize your retirement savings,” she says. “There’ll always be more demands on your money: kids’ activities, places to travel, cars to buy, etc. If you prioritize retirement savings, you start the cycle of investing and growing your money, and then later, as the plan grows, you can start to shift those funds to some other goals.”
In your 60s and beyond:
Your RRSP will convert to a RRIF by the end of the year you turn 71. Meanwhile, your TFSA can keep doing its quiet tax-free magic forever.
“I have some clients who won’t need to use the TFSA at all, and in fact, it’s a very good estate tool to save your money with the intent that it goes tax-free and with no probate to your beneficiaries,” says Sophie. “If that’s not your intent, then I suggest the TFSA as a savings vehicle to cover your expenses after your RRIF may be depleted. TFSA savings can also be great for future health care costs.”
Quick cheat sheet: RRSP vs TFSA vs FHSA.
RRSP
- Annual limit (2026): $33,810
- Tax considerations: Tax deduction now; pay tax upon withdrawal.
- Ideal for: High earners saving for retirement.
TFSA
- Annual limit (2026): $7,000
- Tax considerations: Tax-free growth and withdrawals.
- Ideal for: Flexible savings with any income.
FHSA
- Annual limit (2026): $8,000 ($40,000 lifetime)
- Tax considerations: Tax deduction and tax-free withdrawal for first home.
- Ideal for: First-time homebuyers.
So, should you choose an RRSP, a TFSA, or an FHSA?
If your goal is:
- Retirement: A RRSP is your go-to.
- Flexibility: TFSA all the way.
- Home sweet home: An FHSA’s your new best friend.
And yes, you can (and probably should) mix and match. The ideal combo depends on your income, goals, and life stage.
“You must see where you get the biggest bang for your buck, so if you’re in a higher tax bracket, look to contribute to plans that get you a tax deduction, like an RRSP,” says Sophie. “If you need emergency savings, use a TFSA, as it’s easier to withdraw funds from a TFSA and it’s tax-free. Set up an automated savings amount if you can, within your fluctuating income, so you’re not forced to stop the automated savings.”
General savings advice from Sophie Salcito.
The best thing you can do for yourself financially is to start a savings plan ASAP. “There’s no such thing as too small an amount,” says Sophie. “It all has an impact on your future.”
Expert advice will help you make the most of your assets by choosing investments that are right for you. So, be sure to look for a good fit when it comes to finding an advisor. And if you use online resources, make sure they’re trustworthy.
“Don’t try to keep up with the Joneses or your peers,” Sophie says. “It won’t matter in 10 years. Often, the younger generation is very comfortable doing their investing online, which is fine, but are you prepared to keep on top of changing TFSA maximum limits and the changing rules to the plans? If not, then find an advisor to help you, as sometimes a small fee is worth it if it helps you get ahead faster.”
Ready to make your money multitask?
You don’t have to figure this out alone. Book a one-to-one planning appointment with a Vancity wealth professional and get a plan that works for you.
They’ll help you find the right balance of saving, investing, and still having enough left over for life. Book a free appointment with a Vancity advisor today and start 2026 with confidence.
About Sophie Salcito
Sophie CFP® is Wealth Advisor, with Aviso Wealth who is passionate about providing investment and financial advice. She lives in North Vancouver and enjoys spending time with her husband, daughter and their corgi, Cooper.
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