When you have extra money, you want to make sure that you put it in the best savings account. In Canada, there are several savings options no matter what your needs. Here’s a look at the various savings accounts, their associated fees, and some of Canada’s best high-interest savings accounts.
Types of Savings Accounts in Canada
You may be surprised that there are many different types of savings accounts available in Canada. Here’s a look at some of the most popular savings account options available.
1). Tax-Free Savings Accounts (TFSA)
If you are looking to save on your taxes, you will want to consider a tax-free savings account of a TFSA. With a TSFA, anyone over the age of 18 can open an account and enjoy the ability not to pay taxes on any investments gained within the account. Also, money can be withdrawn from the account tax-free.
2). High-Interest Savings Account (HISA)
Want to get more money from your money? Then you will want to take a look at a High-Interest Savings Account.
With record low-interest rates, some savings accounts pay you next to nothing. However, some other banks and financial institutions are paying many times more than the average savings account.
Usually, you will find HISA accounts from what are known as Neobanks. Neobanks are regulated financial institutions that exist solely online with no physical bank branches. A Neobank’s lower overhead allows them to offer a higher interest rate on their savings accounts usually.
Here are some of the top high-interest savings accounts available in Canada:
- EQ Bank EQ – Bank Savings Plus Account
- AcceleRate Financial – AcceleRate Savings
- Bridgewater Bank – Smart eSavings
- Motive Financial – Motive Savvy Savings
- Wealth One Bank of Canada – High-Interest Savings
3). Youth Savings Account
Want to help your child get a head start on savings? Then you will want to consider opening a Youth Savings Account. With a Youth Savings Account, a child over the age of 12 and under 18 can have their own savings account.
While the Youth Savings Account, the parent will be the account’s joint owner until the child turns 18.
4). Senior Savings Accounts
If you are a senior citizen, you will want to take advantage of a Senior Savings Account. A Senior Savings Account can offer some advantages. For instance, some Senior Savings Accounts can offer lower fees and well lower balance requirements.
5). Money market account
Want to enjoy a higher savings rate? Then you will want to look at a high-interest-paying savings account known as a Money Market Account. Yes, a Money Market Account does pay a higher rate.
However, there are a couple of requirements that must be followed to enjoy that higher rate. First, the Money Market Account will have to meet a minimum deposit, and you will have to maintain a specified minimum balance. A Money Market Account is a great idea if you intend to hold a large amount of cash over a period of time.
6). Certificate of Deposit (CD)
If you don’t intend to use your cash for a certain amount of time, then you will want to take advantage of a certain type of savings account known as a Certificate of Deposit or a CD. With a CD, you will deposit a fixed amount of money that will pay you a fixed interest rate over a set period of time.
Be aware that with a CD, there are early withdrawal penalties.
Rate of return on savings account
When you have a savings account, it is important to be aware of your savings rate. The rate of return will show you how much you will be paid on your savings each month.
The interest rate on your savings account is expressed in an Annual Percentage Rate or an APR. For instance, if you have $1,000 in high-interest paying savings account with an annual percentage rate of 1%, then your account will be paid 0.083% per month or about 83 cents per month.
Savings Account Fees
Be aware that most savings accounts will have some associated fees. Here are two of the most common fees that you will find on a savings account.
1). Transaction fees
Some banks will charge a transaction fee on your savings account.
For instance, if you withdraw money from your savings at an ATM, you can be charged a transaction fee. Some banks will allow you a couple of free transactions per month. Be sure to check your financial institution’s rules on savings account transaction fees.
2). Monthly maintenance fees
Some savings accounts will come with maintenance fees.
Sometimes, these maintenance fees will be waived if the savings account has a certain balance. Be sure to check your bank’s savings account rules about monthly maintenance fees.
All savings accounts in Canada are protected by the Canadian Deposit Insurance Corporation of the (CDIC).
The CDIC will cover your savings account up to C$100,000 in the case of bank failure. If you have more than C$100,000 in one savings account, then you may want to consider opening a second savings account at another financial institution.
However, you should be aware that bank failures are sporadic these days as financial instructions have stringent risk controls in place.
Making the Most of Your Canadian Savings Account
Your savings account can allow you to store and access your cash easily. In some cases, you may be able to enjoy a higher than usual savings rate.
Be sure to compare the savings accounts available from several financial institutions. There is a good chance that you can find a savings account that is ideal for your needs.