TFSA vs RRSP vs FHSA for Newcomers to Canada (2026)

If you are new to Canada, you can use three tax-sheltered accounts: the TFSA, the RRSP and the FHSA. The main difference is how tax works when money goes in and when it comes out. Your TFSA room starts the year you became a resident of Canada and were 18 or older. It is not the $109,000 total you may hear about.

The one picture: tax in, tax out

All three accounts are containers. Inside, you can hold cash, GICs (fixed-term deposits), or funds and stocks.

• TFSA: no tax break going in. No tax coming out.
• RRSP: a tax break going in. Tax coming out.
• FHSA: a tax break going in, and no tax coming out if the money buys your first home.

One word comes up a lot: room. Your room is how much you are allowed to put in. Each account has its own room.

TFSA: the Tax-Free Savings Account

For 2026, the yearly TFSA limit is $7,000.

Why your room isn't $109,000

You may hear that everyone has $109,000 of TFSA room. That number is every yearly limit since 2009 added up. It only applies to people who lived in Canada and were 18 or older back then.

For a newcomer, the CRA says room starts to build on the day you become a resident, if you are 18 or older. It does not go back to 2009.

Room you don't use carries forward. Every January, the new year's limit is added on top. Your exact number is in CRA My Account. You can also get an estimate with our TFSA, RRSP and FHSA room calculator.

How the TFSA works

Inside the account, your money and investments grow tax free. The account lets you withdraw any time, and you pay no tax on what you take out. Some investments held inside it, such as locked-in GICs, may not be cashable early.

What you take out comes back as room on January 1 of the next year. That makes the TFSA the most flexible of the three. An emergency fund, a car, or a goal you haven't named yet can all fit.

RRSP: the Registered Retirement Savings Plan

The RRSP gives you a tax break now. What you put in comes off your taxable income.

Here is a made-up example. Say you earn $60,000 and put in $5,000. You are taxed as if you earned $55,000.

When you take money out later, it is taxed as income. So the RRSP works best when your tax rate today is higher than it will be when you withdraw.

How RRSP room builds

Your RRSP room is 18% of last year's earned income, up to a maximum. For 2026, that maximum is $33,810.

Notice the words "last year". Your room comes from the income on last year's Canadian tax return. So in your first year here, you usually have little or no RRSP room.

Another made-up example: say you arrived in March 2025 and earned $40,000 by December. Your RRSP room for 2026 is 18% of that, or $7,200.

After you file your first return, your limit appears on your Notice of Assessment (the letter the CRA sends after you file) and in CRA My Account.

That is why many newcomers don't start with the RRSP. It gets more useful as your income grows. One exception is a group RRSP at work. If your employer matches what you put in, the match goes into your RRSP on top of your own money.

FHSA: the First Home Savings Account

Like the RRSP, what you put in is deductible, which means it lowers your taxable income. Like the TFSA, what comes out is tax free, as long as it goes toward a qualifying first home.

The limit is $8,000 a year and $40,000 over your lifetime. As an example, if your tax rate were around 30%, putting in $8,000 could cut your tax by about $2,400.

Room starts when you open it

If you skip a year, you can catch up, but only by one year's worth. So the most you can put in during any single year is $16,000.

FHSA room works the opposite way to the TFSA. It starts only once you open the account. Opening it early, even with a small amount, starts the clock.

Who can open one

To open an FHSA, you need to be:

• a resident of Canada
• an adult in your province (18 or 19, depending on where you live)
• 71 or younger
• a first-time home buyer

There is one catch for newcomers. If you or your partner lived in a home one of you owned, even abroad, this year or in the last four years, you can't open an FHSA yet.

If the home never happens, you can move the money into your RRSP with a direct transfer between institutions, without using any RRSP room. If you withdraw it and put it back in yourself, that withdrawal is taxed.

Which one first?

Your own situation decides the order, and a licensed adviser can help. One way to think about the order:

1. FHSA, if buying a home in the next few years is a real goal. You get the deduction now and tax-free money for the down payment.
2. TFSA. It is flexible, tax free, and your room starts the year you arrive.
3. RRSP, once you have room and your income climbs. The higher your tax bracket, the more the deduction is worth.

Two mistakes to avoid

Putting in more than your room

If you go over your TFSA or FHSA limit, the CRA charges a tax of 1% a month on the extra, for every month it stays in. For example, $5,000 too much costs $50 a month. Over a year, that is $600 for nothing.

Your limit is per person, across all your accounts, so it is easy to go over with accounts at two banks.

The RRSP has a small cushion. The same 1% tax applies only to the amount that is more than $2,000 over your limit.

Trusting the big number

The $109,000 figure isn't your room. Count from the year you became a resident. The account room calculator does that count, and CRA My Account has your official number.

Common questions

Do newcomers to Canada get the full $109,000 of TFSA room?

No. The $109,000 is the total of every yearly TFSA limit since 2009. A newcomer's room starts the year they become a resident, at 18 or older.

Can I contribute to an RRSP in my first year in Canada?

Usually there is little or no room in your first year, because RRSP room is 18% of last year's earned income on your Canadian tax return.

Can I open an FHSA if I owned a home in another country?

Not if you or your partner lived in a home one of you owned, even abroad, this year or in the last four years. After that, you may qualify if you meet the other rules above.

What happens if I put too much in my TFSA?

The CRA charges a tax of 1% a month on the extra for every month it stays in. Your limit counts all your TFSAs together, even at different banks.