TFSA vs. RRSP in Canada: Which Savings Account Should You Open First?

Saving money in Canada becomes much more effective when you use tax-advantaged accounts instead of a regular savings account. The two most popular options are the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP).

For most newcomers and gig workers, starting with a TFSA is the best choice. Any interest or investment growth inside a TFSA is 100% tax-free, and you can withdraw your money at any time without penalty if an emergency happens. On the other hand, an RRSP is designed specifically for long-term retirement. Contributions to an RRSP reduce your taxable income today, which helps lower your tax bill if you earn a higher income, but withdrawing money early results in heavy taxes.