Canadians can save and invest their money in a number of registered plans, such as RRSP, FHSA and TFSA. But what are their advantages and differences? How do I choose the right savings plan?
Since we’re talking about personal finances, choosing the right savings plan depends on your personal and financial situation, your needs and your savings goals. You could choose one to plan your retirement (RRSP) or another to save for short-term projects (TFSA). You could also choose one to save for your first home purchase (FHSA), or even two different plans for the same purpose (HBP and FHSA). Which of these savings plans will give you a tax refund and optimize your tax situation? In this article, we explore these savings plans, their advantages and their differences!
First, here’s a comparison chart of the following registered savings plans: RRSP, FHSA and TFSA.
Buying your first home (HBP)
Financing studies (LLP)
Financing a sabbatical year
Now, here’s more information on each of these registered savings plans.
The Registered Retirement Savings Plan (RRSP) is a registered savings account that allows Canadians to save for their retirement. Income from an RRSP or RRIF will supplement government pensions such as the Quebec (QPP), Canada Pension Plan (CPP) and Old Age Security (OAS).
Income generated in the RRSP is tax-free as long as the funds remain in the plan.
RRSP contributions provide a tax refund. They also allow you to access or increase the amounts you receive from social programs such as child allowances and the Guaranteed Income Supplement (GIS).
The year you turn 71 (at the latest), your RRSP must be transferred to a RRIF (Registered Retirement Income Fund). RRSP and RRIF withdrawals are taxable. However, your tax rate in retirement should be lower than your tax rate when you’re in the workforce.
RRSPs can also be used to buy a first home or to go back to school:
Here are the key elements of an RRSP:
To learn more about RRSPs, such as eligibility criteria and contribution room, consult the following guides:
The First Home Savings Account (FHSA) was introduced in Canada in 2023 to help Canadians enter the real estate market. It offers tax-sheltered savings, tax-deductible contributions (like RRSPs) and tax-free withdrawals (like TFSAs).
The contribution room is $8,000 per year, for a lifetime maximum of $40,000. Unlike the HBP (RRSP), withdrawals from FHSA are not restricted. In fact, the entire balance of FHSA (contributions and returns) can be used to purchase a qualifying first home.
Here are the key elements of FHSA:
To learn more about FHSA, such as eligibility criteria and withdrawal rules, consult the following guide:
The Tax-Free Savings Account (TFSA) is a registered savings account that allows Canadians aged 18 and over to contribute money, generate income and make withdrawals tax-free.
This savings plan was introduced by the federal government in 2009. The annual limit varies from year to year. In 2025, the contribution room is $7,000 and the lifetime limit is $102,000. Finally, investment income, such as capital gains, dividends and interest income, is not taxable.
Here are the key elements of the TFSA :
To learn more about the TFSA, such as eligibility criteria and contribution room, consult the following guides:
There’s no single best option, because all 3 savings plans have their own objectives and advantages. Of course, for some objectives, the plans overlap. For example, for the purchase of a first home, the FHSA and the HBP (RRSP) can be used. Another example: for retirement planning, both the RRSP and TFSA can be used, depending on your situation and retirement goals.
Ideally, the best option for an individual is to invest in all 3 plans at once: RRSP, FHSA and TFSA. Provided you don’t already own your home, of course (in which case, you can eliminate FHSA directly).
That said, who really has the savings capacity to be able to maximize all 3 registered savings plans at the same time? In 2025, we will need to save :
That’s why you need to choose a savings strategy based on your personal and financial situation and your savings goals. Consider the tax advantages of the 3 plans, your eligibility for the plans (are you 18? do you already own your home?), your marginal tax rate (is the tax refund low or high?), the duration of your savings (short-term or long-term savings?) and many other factors.
Registered savings plans, such as RRSPs, FHSA and TFSAs, are not investments. The latter are savings accounts in which you can invest.
Eligible investments include:
These types of investments are offered by chartered banks, credit unions, trust companies and insurance companies.
They are also offered by online brokers (brokerage platforms) such as National Bank Direct Brokerage, Desjardins Online Brokerage (Disnat), CIBC Investor’s Edge, Questrade, Qtrade and Wealthsimple.
Whatever your goal, whether short-term (travel, car, renovations) or long-term (retirement savings), having a combination of savings plans is often the best option. Given the annual ceilings and tax advantages of the savings plans, you need to find out about the pros and cons to be able to make an informed choice.
If necessary, don’t hesitate to make an appointment with a professional financial advisor. They can analyze your situation and help you make the right choice, based on your personal circumstances and savings goals.
For more information on RRSPs, FHSA and TFSAs, consult the following guides:
The TFSA allows Canadians to save tax-free. Contributions are not tax-deductible, but withdrawals are tax-free. The contribution limit for 2025 is $7,000. For its part, FHSA facilitates access to home ownership: contributions are tax-deductible and withdrawals are tax-free. It allows you to save $8,000 a year tax-free, up to a lifetime maximum of $40,000.
Yes. If you have already accumulated savings in your RRSP and wish to use FHSA, you can transfer them from your RRSP to FHSA. However, you must respect the contribution limits, and you will not receive any new tax deductions.
Yes, you can combine the HBP ($60,000) and the FHSA ($40,000 + interest) for the purchase of a first eligible property. Be sure to check the rules for each plan.
Of course, you can have both a TFSA and a FHSA. As explained in this article, they each have their advantages.
Yes, contributions to FHSA are tax deductible, just like RRSP contributions. What’s more, tax deductions can be carried forward into the future, for example, when your marginal tax rate is higher.
Savings are here:
