Walk into any Canadian bank branch and someone will try to open both a TFSA and an RRSP for you on the same day. Here's what you actually need to know before deciding.
The fundamental difference
TFSA (Tax-Free Savings Account): You contribute after-tax dollars, your money grows tax-free, and withdrawals are completely tax-free. Available to any Canadian resident aged 18+.
RRSP (Registered Retirement Savings Plan): Contributions reduce your taxable income today, but withdrawals are taxed as income. Your contribution room is 18% of your previous year's earned income.
The newcomer complication
RRSP room only accumulates based on Canadian income. If you just arrived, you may have little to no RRSP room. TFSA room accumulates from the year you become a Canadian resident, so you likely have some room immediately.
The income question
If your income is currently low (under $50,000), the RRSP deduction is worth less because you're in a lower tax bracket. Better to save that RRSP room for higher-earning years. TFSA first makes more sense.
If you're already earning well ($80,000+), the RRSP deduction is immediately valuable — it lowers your tax bill this year.