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RRSP, TFSA, FHSA, RESP: How to Choose When You Can’t Do It All
By Breaking Bank Tax profile image Breaking Bank Tax
2 min read

RRSP, TFSA, FHSA, RESP: How to Choose When You Can’t Do It All

If you’ve ever stared at the alphabet soup of Canadian savings accounts like RRSP, TFSA, FHSA, RESP, you’re not alone. Each comes with its own perks, but most Canadians don’t have the luxury of maxing them all. The trick isn’t knowing they exist. It’s knowing which one makes sense for your goals today.

The Reality Check

StatsCan says just over half of working Canadians put money into either an RRSP or a TFSA in 2023. Only 2.5 million managed to contribute to both. That’s the reality: most people need to make choices.

Start with Flexibility

For young Canadians, the TFSA usually tops the list. It’s simple, flexible, and liquid. You won’t get an upfront tax deduction, but tax-free growth over decades is hard to beat. Plus, you can pull money out if life throws you a curveball. Think of it as your “savings Swiss Army knife.”

Homebuyers: Don’t Miss the FHSA

If a first home is even on your radar, the FHSA is a no-brainer. You can deduct contributions (up to $8,000 a year, $40,000 lifetime), then use the money tax-free when you buy. Layer in the RRSP Home Buyers’ Plan and you can stack up to $100,000 in tax-advantaged funds for your down payment.

Families: RESP Deadlines Matter

The RESP is tailor-made for parents and grandparents, with a 20% government match on contributions (up to $500 a year, per child). But here’s the catch: those grants end the year the child turns 17. Miss that window, and the free money’s gone forever.

Long-Term Wealth: RRSPs Still Matter

For higher earners, RRSPs remain the workhorse. The tax deduction now, plus tax-deferred growth until retirement, can dramatically reduce lifetime taxes. Just remember: RRSP withdrawals are fully taxable later, unlike TFSA withdrawals.

Pro Tip: Stack the Refund

One overlooked strategy: contribute to an RRSP or FHSA, then use the tax refund to fund your TFSA or RESP. It’s a way to double-dip on tax benefits without needing fresh cash.

The Bottom Line

If you can’t do it all, sequence it:

  1. TFSA – your emergency and flexible growth fund.
  2. FHSA – if a home purchase is on the horizon.
  3. RESP – if you’ve got kids and don’t want to miss the grant deadline.
  4. RRSP – once your income climbs and the tax deduction is too good to pass up.

The longer your money sits in any of these plans, the harder it works for you. The key is not perfection, it’s progress.

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