InvestingUpdated May 2026 · 8 min read
TFSA vs RRSP vs FHSA for Canada Newcomers 2026: Which Account First?
Companion article to our YouTube video on registered accounts. Here is the decision framework in plain language.
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Quick summary — the three accounts
TFSA— Tax-Free Savings Account
Tax: No deduction on contribution. Growth and withdrawals are tax-free.
Limit: $7,000/year (2025–26). Room starts accumulating the year you arrive in Canada.
→ Best for most newcomers in year one.
RRSP— Registered Retirement Savings Plan
Tax: Contributions are tax-deductible. Growth is tax-deferred. Withdrawals taxed as income.
Limit: 18% of prior year's Canadian earned income. Minimal or zero in year one.
→ Best once income is $60,000+. Not ideal in year one.
FHSA— First Home Savings Account
Tax: Contributions are tax-deductible. Growth is tax-free. Withdrawals for a first home are tax-free.
Limit: $8,000/year, $40,000 lifetime. Must not have owned a home in last 4 years.
→ Best if you plan to buy a home in Canada. Open early to accumulate room.
Key rules for newcomers
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TFSA room starts the year you arrive, not from birth
If you arrive in 2025 as a 35-year-old, your TFSA room is $7,000 (2025) — not $75,000+ like a long-term Canadian resident. You do not get the historical accumulation.
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RRSP room requires Canadian earned income
In your first year, you likely have little Canadian income, so RRSP room is minimal or zero. This will build as you earn more in subsequent years.
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You must have a Canadian SIN to open any registered account
Apply for your SIN at any Service Canada office immediately on arrival.
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FHSA: you must not have owned a principal residence in the last 4 years
Most newcomers to Canada qualify — owning a home abroad generally does not disqualify you as long as it was not your principal residence in Canada.
Which account should you open first? — Decision framework
Q: Is your income under $60,000 in year one?
→ Open TFSA first. The TFSA is flexible (withdraw anytime, no tax), accumulates room from arrival, and works for any savings goal.
Q: Do you plan to buy a home in Canada in the next 1–15 years?
→ Open FHSA the same day. Even if you can only contribute $100, the account needs to be open for your annual room to accumulate. Every year you delay is $8,000 of lifetime room you can never recover.
Q: Is your income $80,000+ or will it be next year?
→ Add RRSP once income is high. The RRSP deduction is most valuable when you are in the 33%+ federal tax bracket.
Q: Not sure what to invest inside these accounts?
→ Start with a Wealthsimple Managed portfolio (automated, low fees, globally diversified) while you learn. Upgrade to self-directed ETFs later if you want.
Year 1 priority order
- 1Open TFSA → put 3-month emergency fund here first
- 2Open FHSA → even with $1 if you might buy a home someday
- 3Maximize TFSA → index funds or high-interest savings once emergency fund is covered
- 4Defer RRSP → until year 2+ when income is established