10 Surprising Facts About TFSAs, RRSPs and FHSAs

With markets swinging and economic uncertainty driven in part by trade tensions, many Canadians are rethinking how to protect their savings. Understanding the different registered accounts available and how they work can help you use them more effectively to reach both short- and long-term goals. Registered accounts offer features such as tax-deferred growth, tax-free growth, or immediate tax deductions—advantages that can accelerate wealth-building and improve financial stability.

Beyond balance-sheet benefits, Canadians who save inside registered accounts often report greater confidence about their finances. A recent EQ Bank survey found that 71% of people who use a registered account feel proud of their financial goals and confident in achieving them, compared with 37% of those without registered accounts.

Most Canadians know the familiar accounts—the tax-free savings account (TFSA), registered retirement savings plan (RRSP) and first home savings account (FHSA—but awareness of specific rules and opportunities is uneven. The survey highlighted gaps in knowledge about key features of these accounts. Below is a concise guide to ten important points that can help you maximize benefits and avoid common mistakes when using registered accounts in Canada.

TFSA contribution limits and key rules

The TFSA is designed for both short- and long-term savings—everything from an emergency fund to a travel fund or retirement top-up. Contributions aren’t tax-deductible, but investment growth and withdrawals are tax-free. Important TFSA rules include:

1. Withdrawals restore contribution room the following year.

Awareness: 36%

If you withdraw from a TFSA, the amount you remove is added back to your contribution room on January 1 of the next calendar year. For example, a $2,000 withdrawal in 2025 will become available to re-contribute on Jan. 1, 2026. Avoid re-contributing in the same year unless you have unused room, or you may trigger an over-contribution penalty.

2. TFSA contribution room starts at age 18.

Awareness: 48%

Once you turn 18, you begin accumulating TFSA contribution room even if you haven’t opened an account. The room increases each year as the government sets the annual limit (for example, the annual limit for 2025 is $7,000). Use official tools or your CRA My Account to check your individual contribution room.

3. TFSA room is not income-based.

Awareness: 45%

TFSA contribution limits do not depend on your income. All Canadians 18 and older receive the same annual TFSA limit and cumulative room based on the years since they turned 18.

4. Over-contributions are penalized at 1% per month.

Awareness: 32%

If you exceed your TFSA limit, a tax of 1% per month applies to the highest excess amount in each month until the over-contribution is removed.

RRSP basics and lesser-known rules

RRSPs are widely known—most Canadians understand that contributions are tax-deductible and that withdrawals are taxed as income. However, some details are less well understood. Key points to remember:

5. Unused RRSP contribution room carries forward.

Awareness: 54%

If you don’t use all your RRSP room in a given year, the unused portion carries forward indefinitely until the end of the year you turn 71. This lets you contribute larger amounts later when it makes sense for your tax situation.

6. The Home Buyers’ Plan allows larger RRSP withdrawals for a qualifying home.

Awareness: 22%

Under the Home Buyers’ Plan, eligible first-time buyers can withdraw up to $60,000 from RRSPs to buy or build a qualifying home (updated from prior limits). Withdrawals must be repaid to your RRSP over a set period—typically 15 years after an initial grace period—so plan repayments into your budget.

7. RRSP withdrawals permanently reduce contribution room.

Awareness: 26%

Unlike TFSAs, when you withdraw from an RRSP you do not regain that contribution room. Withdrawals are taxed as income in the year they are taken, so consider the long-term tax consequences before accessing RRSP funds. Repayments under specific programs such as the Home Buyers’ Plan or the Lifelong Learning Plan do not restore contribution room and are not tax-deductible.

FHSA: rules for first-time home savers

The First Home Savings Account (FHSA) combines the benefit of tax-deductible contributions with tax-free withdrawals for qualifying first-home purchases. Key FHSA rules include:

8. FHSA room accumulates only after you open an account.

Awareness: 17%

FHSA contribution room begins to accumulate only once you open the account. After opening, you can contribute up to $8,000 per year, subject to the lifetime limit.

9. Annual and lifetime contribution limits apply: $8,000 per year, $40,000 lifetime.

Awareness: 26% (annual) and 22% (lifetime)

The FHSA allows annual contributions of up to $8,000 and a total lifetime limit of $40,000. Over-contributions are subject to a penalty of 1% per month on the highest excess amount for each month it remains in the account.

10. You can carry forward up to $8,000 in unused FHSA room to the next year.

Awareness: 14%

This carry-forward cap means the maximum contribution room available in any single year cannot exceed $16,000 (the $8,000 annual limit plus up to $8,000 carried forward). If you’re unsure when you’ll buy a home, opening an FHSA can still be worthwhile to start building room—unused FHSA savings can also be transferred into an RRSP under certain conditions.

Where to keep cash for short-term goals

When uncertainty is high or you expect to use funds within a few years—such as for a down payment or near-term retirement needs—many savers prefer liquid, low-risk options. Consider these account types for short-term cash savings:

• Registered savings accounts (e.g., RRSP, TFSA, FHSA savings accounts) — These let you hold cash in a registered wrapper so you retain tax advantages while keeping funds accessible.
• High-interest savings accounts — These provide easy access to funds with competitive interest and no or low fees, ideal for emergency funds and near-term goals.
• Guaranteed investment certificates (GICs) — Available with short terms, GICs offer predictable returns and are suitable when you don’t need immediate access to principal.

If you’ve maxed registered limits and still want liquid savings, look for a no-fee personal savings or notice account that pays competitive interest and offers convenient transfers and payments.

When choosing accounts, also verify deposit insurance coverage for registered and non-registered products. Many eligible accounts and GICs are protected by the Canada Deposit Insurance Corporation (CDIC) up to applicable limits per depositor and per insured category.

Interest is calculated daily on the total closing balance and paid monthly. Rates are expressed annually and may change. Bonus interest offers and conditions—such as qualifying recurring direct deposits—may apply to certain accounts; consult the account terms for full details.

Equitable Bank is a member of CDIC. EQ Bank is a trade name of Equitable Bank. Deposits under EQ Bank and Equitable Bank are eligible for CDIC protection up to applicable limits per insured category, per depositor.

Methodology

The findings referenced here come from an EQ Bank survey conducted Jan. 17–20, 2025, with 1,504 online Canadian respondents who are members of the Angus Reid Forum. The survey was conducted in English and French. For comparison purposes, a probability sample of this size would carry a margin of error of approximately ±4.4 percentage points, 19 times out of 20.

More about saving and investing:

• What does a weak Canadian dollar mean for your savings?
• What is the TFSA contribution limit in 2025?
• How to save money in Canada: higher interest and more flexibility

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