The First Home Savings Account (FHSA): A Simple Guide for Future Homeowners

The First Home Savings Account is one of the most helpful tools Canada has created for first-time buyers in years. If you or your kids are hoping to buy a home someday, this is an account worth knowing inside and out.

Here is a simple breakdown of how it works and why it matters.

What is the FHSA?

The FHSA is a registered account designed specifically to help first-time buyers save for a down payment. It combines the tax advantages of an RRSP with the flexibility of a TFSA. That is what makes it so powerful.

When used properly, the FHSA can shave years off the saving process.

Who can open one?

To qualify, you must:

• Be a Canadian resident

• Be at least 18 years old

• Be a first-time homebuyer (which means you have not lived in a home you owned during the past four years)

This makes it an ideal tool for young adults just starting their savings journey.

How much can you contribute?

You can contribute:

• Up to 8,000 dollars per year

• Up to a lifetime maximum of 40,000 dollars

Any unused room carries forward to the next year, up to 8,000 dollars of carry-forward room at a time.

Even small monthly contributions add up quickly.

Why the FHSA is so powerful

The FHSA has three major benefits that work together:

1. Contributions are tax deductible

This means you can claim the contributions on your taxes, which may lower your taxable income for the year.

2. Withdrawals for your first home are tax free

If you use the money for a qualifying first home, you do not pay tax on the withdrawal.

3. Investment growth is tax free

Whether you invest in mutual funds, ETFs, or simple interest-bearing products, all growth inside the account is sheltered from tax.

These three features together create one of the most efficient home-saving vehicles available in Canada.

Can you combine the FHSA with the Home Buyers’ Plan?

Yes. This is where strategy comes in.

You can use both:

• FHSA funds (tax free)

• RRSP Home Buyers' Plan funds (withdrawn and repaid over time)

This can significantly increase the amount available for your down payment.

What if you do not buy a home?

If life shifts and you choose not to buy, your FHSA does not go to waste.

You can transfer the funds, tax free, into your RRSP or RRIF. This transfer does not require RRSP contribution room, which is a major perk.

When should someone open an FHSA?

The earlier, the better. Even if contributions start small, opening the account locks in future contribution room and gives the money more time to grow.

Many parents encourage their kids to open one the year they turn 18 so they can begin building room and forming healthy saving habits.

Helpful example

If someone contributes 250 dollars a month, they will reach the 8,000 dollar annual limit. Over five years, that is 40,000 dollars contributed, plus any investment growth, all tax free when used for a first home.

For a young buyer, this can be the difference between waiting and being ready.

A simple tool with big impact

The FHSA is not complicated once you understand the basics. It is a practical, accessible way for young Canadians to get ahead in a challenging housing market.