One of the most common questions I hear from clients — especially those just starting to invest — is: "I have some money to invest. Where should I put it?" The answer depends on your income, your goals, whether you have children, and what your tax situation looks like in retirement. But there is a general priority order that works for most Canadians.
Your four main account options
Before we get to the priority order, here's a quick look at each account type and what makes it unique:
Grow and withdraw money completely tax-free. Withdrawals don't affect OAS or GIS benefits in retirement.
Tax-free growth & withdrawalContributions reduce your taxable income today. Investments grow tax-sheltered until you withdraw in retirement.
Tax deduction + deferred growthSave for your child's education with government matching grants up to $7,200 per child over their lifetime.
Free government grantsNo contribution limits and no tax shelter. Full flexibility with no restrictions on access or amount.
No limits, full flexibilityThe recommended priority order
For most Canadian families, here is the order Carrie recommends when deciding where to invest your next available dollar:
Employer RRSP match — if available, always do this first
If your employer matches RRSP contributions, contribute at least enough to capture the full match. This is an immediate 50–100% return before a single investment gain occurs. No other financial move delivers that kind of instant return.
RESP — if you have children under 17
Contribute at least $2,500 per child per year to receive the full annual Canada Education Savings Grant (CESG) of $500. The government is giving you free money — this should take priority over most other investing. Over a child's lifetime, this can add up to $7,200 in grants, plus all the investment growth on top.
TFSA — flexible, powerful, and right for most Canadians next
For most people, the TFSA is the next best home for your money. Tax-free growth and completely tax-free withdrawals make it ideal for almost any goal — whether that's a home down payment, car, emergency fund, or retirement savings. Withdrawals don't count as income, so they never affect your OAS, GIS, or other income-tested government benefits.
RRSP — especially if your income is above $80,000
If you're earning $80,000 or more, RRSP contributions deliver powerful tax refunds that you can reinvest immediately. The higher your income today, the more valuable the deduction becomes — especially if you expect your tax rate to be lower in retirement. A $20,000 RRSP contribution in a 43% tax bracket saves $8,600 in taxes this year.
Non-registered — once registered accounts are maximized
Once your TFSA and RRSP contribution room is used up, a non-registered account is an excellent overflow vehicle. There are no contribution limits, capital gains are taxed at a preferential rate, and Canadian dividends receive a tax credit — making it more tax-efficient than it might seem.
Carrie's practical tip: For most of my clients with children, we prioritize the RESP first (to capture government grants), then split remaining savings between the TFSA and RRSP based on current income. If you're unsure which order is right for your situation, let's walk through it together — the right answer changes based on your income, family situation, and retirement timeline.
TFSA vs RRSP: the one question that decides it
The single most important factor in choosing between TFSA and RRSP is: Is your marginal tax rate today higher or lower than it will be in retirement?
- If your income is high now and will be lower in retirement → RRSP wins. The deduction saves you tax at your high current rate; you pay tax at a lower rate later.
- If your income is moderate or similar in retirement → TFSA wins. No tax deduction now, but withdrawals are completely tax-free forever — and won't affect OAS, GIS, or income-tested benefits.
- If you're unsure → do both. Split contributions and give yourself flexibility to draw from both in retirement, managing your taxable income each year.
Side-by-side comparison
| Account | Tax deduction | Tax-free growth | Tax-free withdrawal | Affects OAS/GIS? | Best for |
|---|---|---|---|---|---|
| TFSA | — | ✓ | ✓ | No | Most goals, any income |
| RRSP | ✓ | ✓ | — | Yes | High earners, retirement |
| RESP | — | ✓ | Taxed in student's hands | No | Children's education |
| Non-Reg | — | — | — | Yes | Overflow investing |
The bottom line
There's no single right answer for everyone — the best account strategy depends entirely on your personal income, life stage, family situation, and retirement goals. But the framework above gives you a strong starting point. And if you're not sure where you fall, a brief conversation with Carrie can give you a clear, personalized answer in minutes.
Ready to figure out your own priority order? Book a free consultation with Carrie — she'll review your current accounts, income, and goals and give you a clear, concrete recommendation tailored to your situation.
Carrie Wang
Carrie is the founder of Seven Lakes Financial Services Inc. and a Sun Life advisor serving clients across Ontario and Saskatchewan. She specializes in retirement, estate, and investment planning, with a warm, personalized approach. She is fluent in English, Mandarin, and Taiwanese.