TFSA, RRSP or FHSA: Which Should You Fill First?

Canada gives you three tax-sheltered accounts with genuinely different mechanics, and most of the confusion comes from treating them as three flavours of the same thing. They are not. The order that makes sense depends almost entirely on when you are taxed and at what rate.

What follows is general information about how these accounts work, not financial advice. We build a personal finance app, not a tax practice - for anything that turns on your specific numbers, talk to an accountant or a fee-only planner.

How the three actually differ

The row that trips people up most is the third one. An RRSP is not a tax saving so much as a tax deferral: you avoid tax at today's rate and pay it at your rate in retirement. That is a win when today's rate is higher, and a loss when it is lower.

The order most people end up using

1. Any employer match, first. If your employer matches contributions to a group RRSP or pension, that match is an immediate return nothing else in this list competes with. Contributing enough to capture it in full is the one step that is close to universal.
2. High-interest debt. Not an account, but it belongs here. A balance costing you a high double-digit rate outruns any sheltered return.
3. FHSA, if a first home is realistic. It is the only account that gives a deduction going in and comes out tax-free, so for a qualifying purchase it is strictly better than either of the others. Room only starts accumulating once the account is open, which is why people open one early even before contributing much.
4. Then RRSP or TFSA, on your tax rate. The deduction is worth more the higher your current marginal rate. If you are early in your career, on parental leave, or between jobs, the deduction is worth less now than it will be later - and RRSP room carries forward, so there is no rush to use it.

The step people skip is the fourth one. RRSP room does not expire. If this is a low-income year, contributing to a TFSA and keeping the RRSP room for a higher-earning year is often the better use of the same dollar.

The trap: contribution room is easy to lose track of

Over-contributing carries a penalty tax, usually assessed for every month the excess sits in the account. And the number people check most often - the room shown in CRA My Account - is not live. It reflects what has been filed and processed, so partway through a year it can be badly out of date.

Two things make this worse than it sounds. TFSA room from a withdrawal does not come back until the next calendar year, so withdrawing and re-contributing in the same year is a common and expensive mistake. And if you contribute at more than one institution, no single one of them sees your total.

The practical fix is to take the CRA figure as your starting balance at the beginning of the year, then track your own contributions as you make them.

Tracking it without a spreadsheet

Cadence handles this with goals: one goal per account, with that year's limit as the target, and contributions counting toward it. You get a running figure for how much room is left, across every institution, without waiting for the CRA to catch up. The full walkthrough is in the support centre.

To be clear about what it does not do: you enter the limit yourself. Cadence does not read your contribution room from the CRA, and no app can. What it removes is the arithmetic and the scattered record-keeping, not the need to know your own number. More on how registered accounts work in Cadence.