Top FHSA Investment Choices for Canadians Today
The First Home Savings Account (FHSA) is a game-changer for Canadians dreaming of owning their first home. Introduced in 2023, this tax-free savings plan allows you to accumulate a down payment more quickly, with tax-deductible contributions and tax-free withdrawals to purchase homes. But what can you invest in with your FHSA, and how can you make it work for you? This guide explores the most effective investments in your FHSA, and it is designed to assist you in earning maximum savings without going off track of your financial objectives. For a deeper understanding of the FHSA’s benefits, check out The Tax-Free First Home Savings Account (FHSA). Let’s dive into how you can grow your FHSA wisely.
What is an FHSA?
The FHSA is a registered savings plan for first-time homebuyers in Canada. It enables you to invest a maximum of $8000 per year and an additional 40000 in your lifetime, and you can invest those amounts tax-free. Unlike an RRSP or TFSA, the FHSA is specifically for purchasing a qualifying home, offering tax deductions on contributions and tax-free withdrawals for eligible purchases. If you don’t buy a home within 15 years, you can transfer the funds to an RRSP or TFSA without penalty. Learn more about the FHSA’s purpose at the Canada Revenue Agency’s official page.
FHSA Contribution Limits and Rules
Understanding the FHSA’s rules is key to making smart investment choices. You can contribute $8,000 per year, up to a total of $40,000, and carry forward unused contribution room (up to $8,000 per year). Cash deposited is a tax-deductible contribution, which lowers your taxable income, and withdrawals related to a first home are tax-free. The account must be closed after 15 years or when you turn 71. To obtain the latest details on contribution limits, check the CRA’s FHSA guide. These limits are up to date with no significant changes in the rules being announced in 2025. To explore how to diversify your investments across accounts like the FHSA, see How to Build a Diversified Investment Portfolio in Canada.
Qualified Investment Options for Your FHSA
The FHSA allows you to invest in a range of qualified investments, similar to RRSPs and TFSAs. These include:
- Mutual Funds and ETFs- diversified funds that invest in stocks, bonds, or both. The fees of ETFs that track the S&P 500 are often lower than mutual funds, which makes them a popular long-term growth investment.
- Stocks and Bonds – shares of individual companies or government/corporate bonds. Stocks may provide higher growth but are riskier; bonds are more stable.
- GICs (Guaranteed Investment Certificates) – tie up your funds over a set period and get guaranteed returns. Ideal for risk-averse savers. In 2025, rates range from 2–4 % for 1‑5-year terms.
- Cash or High-Interest Savings Accounts – low-risk accounts that earn minimal returns. Great for short-term goals or an emergency fund inside the FHSA.
Learn more about qualified investments on the FHSA investments page of the CRA. For those interested in aligning investments with ethical values, consider exploring How to Choose the Right SRI Robo-Advisor for sustainable options.
Popular FHSA Investment Strategies
The selection of the right strategy will be determined by your schedule, risk tolerance, and financial objectives. The three common approaches are:
- Conservative Strategy – appropriate when you intend to purchase a home in 1-3 years. Prioritize low‑risk options like a 2‑year GIC at 3 % or a high‑interest savings account. This keeps your principal safe while earning modest returns.
- Balanced Strategy – good for a 3–7 year horizon. Mix 60 % ETFs with 40 % bonds. A balanced ETF that tracks a global stock index delivers growth with moderate risk.
- Growth Strategy – most suitable when you are 7 or more years away. Lean toward stocks or equity‑focused ETFs. Historically, the stock markets have an average annual return of 6-8 percent, but the volatility is greater.
Ask yourself how soon you’ll need the funds. The longer the timeline, the riskier and higher-paying investments can be made. You should always seek the advice of a financial advisor in order to customize your strategy. For low-cost, automated investment options, check out Robo-Advisors with No Minimum Balance for Canadian Investors.
Risks and Considerations
There are risks associated with investing in an FHSA. Stocks and ETFs are subject to fluctuations and may decrease your savings when the markets fall, when you need to withdraw. Although GICs are safe, they might not be able to keep up with inflation, which erodes purchasing power. In addition, excess amounts in your FHSA are taxed at 1% a month, so keep a close watch on contributions. Risk can be reduced by diversifying the assets. For example, GICs plus a small allocation to stock balances stability and growth. Monitor the market trends and make changes to your portfolio.
Next Steps for Canadians
Ready to start your FHSA journey? Open an account with a reputable financial institution, such as a bank or brokerage, that has FHSA plans. Compare fees, investment options, and account flexibility. After setting up an account, make regular contributions in order to maximize tax benefits and growth. Not sure where to start? Consult a financial advisor to make sure your FHSA investments match your home-buying schedule and risk tolerance. Visit Global Investor for more tips on building wealth for your future home.
With the right investments and discipline, your FHSA can help you get a step closer to owning a home. Start today, and let your savings work for you!