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Module 5 · 12 min read

Growing your savings tax-free

The TFSA, FHSA, and RRSP in plain language

Why this matters for newcomers

Canada gives you special accounts where your savings can grow without being taxed. Many newcomers either don't use them, or leave the money sitting in cash where it barely grows. Understanding these three accounts is one of the most powerful things you can do for your future.

Think of them as containers, not investments

A TFSA, FHSA, or RRSP is like a special box with tax benefits. Inside the box, you choose what to hold: cash, a savings account, or investments like funds that own many companies. The box gives you the tax savings; what you put inside decides how much it grows.

TFSAFHSARRSP
Best forAnything: emergencies, goals, long-term growthBuying your first home in CanadaRetirement, and lowering your taxes
2026 limit$7,000 a year$8,000 a year, $40,000 in total18% of last year's earned income, up to $33,810
TaxesNo tax on growth or withdrawalsTax deduction when you put money in; no tax when used for your first homeTax deduction when you put money in; taxed when you take it out
Newcomer noteYour room starts the year you become a residentRoom only starts when you open the accountUsually no room in your first year, since it's based on the previous year's Canadian income

The TFSA (Tax-Free Savings Account)

You must be 18 or older, a resident of Canada, and have a SIN. Your room begins in the year you become a resident, and you get the full year's amount ($7,000 in 2026) even if you arrived late in the year. You don't get room for years before you lived here. Money you take out can be put back starting the next year.

Watch out

Putting in more than your room costs a penalty of 1% per month on the extra amount. Check your exact room in CRA My Account, especially if you have TFSAs at more than one bank.

The FHSA (First Home Savings Account)

If owning a home in Canada is part of your dream, this is the most powerful account for it. You get a tax deduction when you put money in, and pay no tax when you take it out to buy your first home. Room only starts once you open the account, so opening one early, even with a small deposit, is a smart move. If you never buy a home, the money can be moved into your RRSP.

Newcomer tip

Owned a home back home? For the FHSA, a home you owned and lived in outside Canada counts. If you (or your spouse or partner) lived in a home you owned during this year or the previous four years, you have to wait before you can open one.

The RRSP (Registered Retirement Savings Plan)

Your RRSP room is based on the income you earned in Canada the year before, so it builds up after your first year of work. The RRSP is most valuable once your income is higher, because the tax deduction is worth more. It also has a Home Buyers' Plan that lets you borrow up to $60,000 from it toward a first home.

Which one first? A common approach

  1. 1
    A small emergency fund
    So a surprise doesn't become debt
  2. 2
    The RESP, if you have children
    The 20% grant is hard to beat
  3. 3
    The FHSA, if you hope to buy a home
    Open it early to start your room
  4. 4
    The TFSA
    Flexible, for any goal
  5. 5
    The RRSP
    More useful as your income grows

Everyone's situation is different, so treat this as a starting point to discuss, not a rule.

What to put inside: keep it simple

You don't need to pick stocks or follow the news. Many people use low-cost, diversified funds, such as all-in-one index ETFs, that spread your money across thousands of companies around the world. Fees matter a lot over time: a fund charging 2% a year can cost you tens of thousands of dollars more over decades than one charging 0.25%. Always ask, “What is the total yearly fee?”

The power of starting small and early

Putting $100 a month into a TFSA for 20 years means you contribute $24,000. At an average of 5% a year, it could be worth about $41,000, and none of that growth is taxed. Try your own numbers.

What you put in
Tax-free growth
Could be worth
Your contributionsGrowth

Investments go up and down; these rates are only an illustration, not a promise.

Newcomer tip

U.S. citizens and green card holders: the TFSA, FHSA, and RESP can cause tax problems with the U.S. Speak with a tax professional who works with both countries before opening them.

Your next small step

Track it on your first-year checklist →

Learn more

Official, free sources. Always check these for the latest amounts before making a decision.