Understanding TFSA, RRSP, and FHSA: A Guide for New Immigrants in Canada


Welcome to Canada, where planning for your financial future is a pivotal step in settling into your new home. For new immigrants, understanding the savings accounts available, like the Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), and the newly introduced First Home Savings Account (FHSA), is essential. This guide will simplify these options and help you make informed decisions to grow your wealth in Canada.

You can open these accounts at any bank of your choice. My best experience is with ATB Financial and Wealthsimple.

Tax-Free Savings Account (TFSA)

The TFSA is a flexible savings vehicle that allows you to earn tax-free investment income. It’s available to individuals aged 18 and older with a valid Social Insurance Number. Here’s what you need to know about TFSA:

  • Contributions are made with after-tax dollars and aren’t tax-deductible.
  • Any investment growth and withdrawals are tax-free.
  • There is an annual contribution limit, but unused room can be carried forward.
  • Withdrawals can be re-contributed in the following year.

Registered Retirement Savings Plan (RRSP)

The RRSP is designed to encourage retirement savings. Here are the key points:

  • Contributions reduce your taxable income, potentially leading to a tax refund.
  • Investment growth is tax-deferred until withdrawal, typically during retirement when you may be in a lower tax bracket.
  • There is a contribution limit based on 18% of your earned income from the previous year, up to a maximum amount.
  • You can borrow from your RRSP to buy your first home or fund your education under certain plans, with conditions for repayment.
  • Once you withdraw from RRSP, the amount will add to your income and hence need to be declared in your tax return.

First Home Savings Account (FHSA)

The FHSA is a new program aimed at helping first-time homebuyers save for their purchase:

  • Contributions are tax-deductible, reducing your taxable income.
  • Investment growth and withdrawals for a first home purchase are tax-free.
  • There’s an annual contribution limit and a lifetime contribution limit.
  • It’s designed for first-time homebuyers, and funds must be used for buying your first home.

Comparing TFSA, RRSP, and FHSA

While all three accounts offer tax-advantaged savings, they serve different purposes and have unique features. For instance, TFSAs are great for short-term and flexible savings goals, whereas RRSPs are specifically for retirement. FHSAs are tailored for saving towards buying your first home in Canada.


As a new immigrant in Canada, choosing the right savings account—TFSA, RRSP, or FHSA—depends on your financial objectives, whether it’s saving for retirement, buying your first home, or investing flexibly. Understanding these options is the first step toward building a secure financial future in your new country.

NOTE: I am NOT a financial advisor.

Leave a Reply

Your email address will not be published. Required fields are marked *