RRSP, TFSA or FHSA: which should you fund first?

Updated November 2026

There is no single right order, but a few questions settle most cases: is your employer offering free matching money, are you saving for a first home, and is your tax rate higher now or later? Start with whatever gives you the biggest guaranteed benefit, then fill the rest.

The three accounts in one minute

RRSP: Deduction when you contribute; withdrawals are taxed. 2026 room is 18% of 2025 earned income, up to $33,810, less any pension adjustment. Best when your tax rate now is higher than in retirement. See RRSPs explained.
TFSA: No deduction; growth and withdrawals are generally tax-free and do not affect federal income-tested benefits. $7,000 of new room in 2026, and withdrawals are added back the next January 1. See TFSA.
FHSA (first home savings account): For first-time buyers. Contributions are deductible like an RRSP, and a qualifying withdrawal for a home is tax-free like a TFSA. $8,000 a year, $40,000 lifetime. See FHSA.

Step 1: take any employer match

If your employer matches contributions to a group RRSP or pension, contribute at least enough to get the full match before anything else. A 50% match is an instant 50% return on the money you put in, before any tax saving or investment growth. Few other choices beat that. See Group RRSPs.

Step 2: by situation

Saving for a first home

The FHSA usually comes first. You get a deduction going in and pay no tax coming out for a qualifying purchase, which neither the RRSP nor the TFSA offers. You qualify as a first-time buyer if you did not live in a home that you or your current spouse or common-law partner owned in the current year or the previous four calendar years. If you have more to save, you can also use the RRSP Home Buyers’ Plan for the same home, but HBP money must be repaid to your RRSP over 15 years, while an FHSA withdrawal does not.

Low income now

A TFSA is usually the better first choice. An RRSP deduction saves little when your tax rate is low, and if you stay on a modest income into retirement, RRSP withdrawals could reduce income-tested benefits such as the Guaranteed Income Supplement. TFSA withdrawals do not. If you do contribute to an RRSP, you can hold off claiming the deduction until your income rises.

Middle or high income

An RRSP tends to give the bigger benefit, because the deduction saves tax at a high marginal rate and many people withdraw later at a lower one. Many people in this situation fund the RRSP first, put the refund into a TFSA, and use the TFSA for goals before retirement.

Workplace pension with matching

Get the match first. If you are in a defined benefit or DPSP arrangement, your pension adjustment may leave you little RRSP room, and a TFSA can fill the gap. Check your notice of assessment for your actual room (Contribution limits).

Saving for children’s education

For children, look at a registered education savings plan (RESP) before an extra RRSP dollar. The Canada Education Savings Grant adds 20% on the first $2,500 contributed each year, which is $500 a year per child, up to $7,200 per child over their lifetime. Lower-income families may also get the Canada Learning Bond without contributing anything. See RESP basics.

Paying off debt

High-interest debt such as credit card balances usually costs more than investments reliably earn, so paying it down is often the best “investment”. The mortgage question is closer; see Mortgage or RRSP?.

Quick reference table

Typical first choice by situation (a starting point, not personal advice)
Situation	Usually first	Then
Employer offers matching	Group plan, up to the full match	Depends on the rows below
Buying a first home	FHSA ($8,000 a year)	RRSP for the Home Buyers’ Plan, or TFSA
Low income now	TFSA	RRSP later, when income rises
Middle or high income	RRSP	TFSA, often with the refund
Expect high income in retirement	TFSA	RRSP, with a withdrawal plan
Saving for children	RESP (to get the $500 yearly grant)	RRSP or TFSA
Need money within a few years	TFSA	—

Common mistakes in choosing

Choosing an RRSP for an emergency fund. Withdrawals are taxed and the room is lost; a TFSA is more flexible.
Spending the RRSP refund. The comparison with a TFSA assumes you invest it.
Ignoring the FHSA because the purchase is years away. Room only starts building once you open one, and the account can stay open for up to 15 years.
Thinking it must be one or the other. Most households end up using two or three accounts.

For a fuller plan, see Financial planning. If your situation is complex, a registered planner or tax professional can help; see Choosing an advisor.