Why this decision feels confusing

When you have a little extra cash each month, the choices can feel overwhelming: invest, save, or crush debt? The good news is you don’t need to guess. A few simple rules can guide you.

The simple decision order for most families

For many mid-income Canadian households, a helpful default order looks like:

  1. Build a small emergency cushion (TFSA or savings)
  2. Use TFSA for flexible long-term investing
  3. Contribute to RRSP if you’re in a higher tax bracket
  4. Send extra payments to the mortgage if your rate is high

This order isn’t fixed — it shifts based on your income and mortgage rate.

1. When a TFSA should come first

If your income is under roughly $60,000, RRSP contributions tend to produce smaller tax refunds. That often makes the TFSA the stronger first choice.

  • Tax-free growth forever
  • No penalties for withdrawals
  • Strong flexibility for real life

2. When an RRSP beats your TFSA

RRSPs become especially powerful when your income is high enough to trigger meaningful tax refunds:

  • Income above roughly $70–80k
  • You reinvest the tax refund
  • You expect lower income in retirement

When those conditions line up, RRSPs can outperform both TFSAs and mortgage prepayments.

3. When the mortgage should be your focus

Extra mortgage payments shine when rates are high.

  • Mortgage rates around 5–6% or higher
  • Limited RRSP refund benefit
  • A preference for guaranteed, risk-free returns

Paying down a 5.5% mortgage is like earning a guaranteed, tax-free 5.5% return.

If you’re still deciding between registered accounts, start with our RRSP vs TFSA guide, then come back here to factor in your mortgage.

Tip: If you have high-interest consumer debt (credit cards or unsecured lines of credit), pay those off before focusing on RRSPs, TFSAs, or mortgage prepayments.

Choosing a “good enough” strategy

The truth is that all three options help your future. The goal isn’t perfection — it’s momentum.

Pick a strategy that feels achievable, stay consistent, and revisit the plan once a year.

Quick reminder: This guide is educational only and doesn’t replace professional financial or tax advice.

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