• Large purchase / Emergency fund

Canadians generally keep emergency funds in savings accounts, where any interest earned attracts the marginal tax rate. TFSAs are a much better bet for storing emergency reserves, or building up funds for a particular expenditure: no tax on interest earned, contribution room replenished to match any withdrawals, and money can be withdrawn for any purpose.

 
• Education

You can use the Lifelong Learning Plan to use up to $20,000 of your RRSP savings for education purposes. If you don’t repay the money, it is included as income and taxed.

You can use money in your TFSA for anything you wish. While deposits don’t generate tax deductions as with RRSPs, investment income earned in a TFSA does grow tax-free, does not have to repaid, and can be withdrawn at any time. Amounts withdrawn will never be taxed.

 
• Child’s education

RESPs are designed to help save for a child’s education, and they have the significant advantage of triggering Canada Education Savings Grants. These deposit at least an additional 20% into the plans.

If you have contributed enough to trigger the maximum CESG of $7,200 per child, and your child is age 18, gift $5,000 to your child, who can then use this amount to open a TFSA. Save even more (which can then be withdrawn completely tax free. Remember that the investment earnings of the RESP as well as the Canada Education Savings Grant (CESG) paid are included in income).

 
• First Home

The popular Home Buyers’ Plan (HBP) lets first-time buyers withdraw up to $20,000 of RRSP savings to use toward the down payment. Using a TFSA to save for/buy a home has advantages too:

• First-time buyers who want to save more than $20,000 (or $40,000 per couple) can augment their savings in a TFSA.
  
  
• Money borrowed via the HBP must be repaid on a schedule, or it is counted as income and taxed. This is not an issue with TFSA funds. You don’t have to pay taxes, and you don’t have to repay the money. Remember that withdrawals replenish the TFSA room in the next year, something that doesn’t happen with RRSPs.

 
• Second property

If you’re contemplating moving up to a larger house, buying an additional property, or downsizing, putting the money in a TFSA will let your savings grow tax-free. Since you don’t have access to the HBP, using a TFSA to save and enjoy tax advantages is smart planning.

 
• Earn more than your spouse

A spouse can open a TFSA using money that their spouse has gifted to them. Use this strategy together with spousal RRSP contributions and the new pension splitting rules, and you’ve got an effective, efficient way to minimize a couple’s tax burden and maximize income.

 
• Maxed out RRSP contributions

If you regularly max out your RRSP contribution room, maxing out your TFSA as well can add as much as $8,300 of additional room every year (assuming a 40% tax rate). This is a great way to build retirement funds on a tax-assisted basis.

 
• Company pension plan

Company pensions are good news, no doubt about it. But having a company pension results in a Pension Adjustment that reduces your RRSP room for the next year. Again, putting your savings into a TFSA effectively adds to your contribution room, making way for even more tax-assisted saving.

 
• RRIF withdrawals

If you’re 71 or older and have to make RRIF withdrawals, but are lucky enough not to need the money, put the withdrawals into a TFSA. You’ll continue to grow your savings on a tax-assisted basis, and you won’t have to worry about taxes when you decide to use the money.

 
• Government benefits

RRSP withdrawals can result in losing the Guaranteed Income Supplement and triggering the OAS claw back. TFSA earnings and withdrawals don’t affect these and other income-tested benefits at all. While the benefits of RRSPs may be debatable for lower-income earners, the benefits of TFSAs are clear: they provide the tax deferral benefits of an RRSP without any of the drawbacks.