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Young Canadians Flocking To First Home Savings Accounts
June 26, 2024 | Posted by: Angela Robinson
As home prices soar in Canada, young Canadians are looking for effective ways to save for their first home. The First Home Savings Account (FHSA) is a new tax-free savings account designed to help future homeowners build their down payment efficiently. While most Canadian banks are still rolling this out, RBC and National Bank have already made the FHSA available, and demand is high.
High Demand Among Young Canadians
Since launching the FHSA in April 2023, RBC reports 'tens of thousands' of accounts opened, mostly held by Canadians under 45. Flora Do, RBC's VP of Investments Transformation, noted the enthusiasm, stating, “We’re seeing amazing interest in this new tax-free account, particularly among younger Canadians who are building a down payment for their first home.”
National Bank echoed this, revealing that demand has “exceeded our expectations,” especially among account holders in their 30s. Many are contributing the maximum annual amount, showing strong commitment to their homeownership goals.
What is the FHSA?
Announced in the 2022 federal budget, the FHSA combines benefits of an RRSP and a TFSA:
- Tax Deductible Contributions: Like an RRSP, contributions are tax deductible.
- Tax-Free Earnings: Like a TFSA, earnings are tax-free if used for home purchases.
- Contribution Limits: Lifetime limit of $40,000 and annual limit of $8,000, with carry-forward options.
- Eligibility: Open to first-time homebuyers aged 18-71 in Canada.
Who is Signing Up?
At RBC, 56% of FHSA holders are aged 25-34, followed by 20% aged 35-44. Over a quarter have contributed the maximum annual amount, and more than 5% had made tax-free withdrawals for a down payment by June 30.
When Will Other Banks Offer FHSAs?
Other major banks will offer FHSAs later this year:
- TD Bank & Scotiabank: Later this month
- BMO: Later in 2023
- CIBC: November
Start Your Homeownership Journey
The FHSA is a powerful tool for young Canadians aiming to enter the housing market. With tax-deductible contributions and tax-free earnings, it provides a significant advantage in saving for a down payment. Keep an eye on your bank’s offerings and consider opening an FHSA to take a big step towards owning your first home.
