TFSA or FHSA: what to open at 18

Two accounts matter most when you turn 18: the TFSA and the FHSA. Both let your savings grow tax-free, and both reward you for starting early.

The TFSA (Tax-Free Savings Account)

• Room starts the year you turn 18. For 2026 that’s $7,000 a year. If you became a resident later, it starts that year instead.
• Unused room carries forward forever. Turn 18 in 2026 and don’t contribute, and you’ll have $14,000 of room in 2027 (if the limit stays at $7,000).
• Growth is tax-free, including interest, dividends and investment gains.
• Withdraw any time. What you take out gets added back to your room on January 1 of the next year.
• Don’t over-contribute. Excess amounts are taxed 1% a month until you remove them.

If your province’s age of majority is 19, some banks won’t open the account until then. Your room still builds from 18 and carries forward.

The FHSA (First Home Savings Account)

The FHSA is the best tax deal there is for a first home.

• $8,000 a year, $40,000 lifetime.
• Money going in is tax-deductible, like an RRSP.
• Money coming out for a first home is tax-free, like a TFSA.
• Room only starts once the account is open. If you can’t contribute this year, up to $8,000 of unused room carries forward to the next.
• You must be 18 or older (or the age of majority in your province), a resident, and a first-time home buyer. That means you haven’t lived in a home you owned this year or in the previous four calendar years.
• The account can stay open for up to 15 years. If you never buy a home, you can move the money into an RRSP without using up RRSP room.

Why open one with $0? Opening it starts your clock and your carry-forward room. Leave it empty until you have money to put in.

Which first?

A simple way to decide:

1. Emergency money first. Keep a month of expenses somewhere you can reach it. A TFSA savings account works.
2. Thinking about buying a home someday? Open an FHSA now, even if you can only add small amounts.
3. Everything else long term goes in your TFSA.
4. RRSP later. An RRSP deduction is worth more when you earn more. While your income is low, a TFSA usually wins. The exception is if your employer matches RRSP contributions. Always take the match.

A note on investing

Both accounts can hold cash, GICs, or investments like low-cost index funds. Cash is fine for money you’ll need soon. For money you won’t touch for years, investments have historically grown more, with ups and downs along the way. This is general information, not advice for your situation.