A wise shopper always compares different options before making a final decision. Even if it’s something as simple as a shirt, or as big as a real estate investment, you need to decide what’s going to give you the best bang for your buck. If you shop around for your purchases, it’s even more important to shop around for the best savings account. Financial experts know everything about savings accounts and can easily pinpoint which accounts give you the best interest rates and security. But, what about regular people with no financial background? Let’s find out more
Types of savings accounts: what type suits you best
There’s no better way to start educating yourself about savings accounts than finding out what your options are. Let’s compare the different types:
High-Interest savings accounts
These savings accounts offer higher interest rates compared to traditional accounts. A few years ago, interest rates of 3% were completely unheard of in this market. So when a few small banks introduced this rate, a large wave of new savings account holders soon followed. Today, high-interest savings accounts offer an average of 2% on interest rates. Just make sure to consider the fact that putting your money into non-registered high-interest savings accounts means you need to pay income tax on any money earned.
Tax-free savings account
If you raised your eyebrows at the words “income tax”, this could be an option for you. Tax-free savings accounts allow you to save and grow your money without paying taxes, among other benefits. This could turn out to be a profitable investment, as your money won’t be reduced in any way, regardless of income size.
Youth savings account
Designed for young Canadians, youth savings accounts are the perfect way to teach kids about saving money. These accounts usually come with added perks, such as lower fees.
Senior savings accounts
Senior savings accounts offer additional incentives and useful features for older Canadians. It’s difficult to know which of these accounts will best suit your needs. Everyone has different requirements, and your individual needs will dictate the account that fits you best.
Here’s why it’s important to research before opening a savings account
Now you have a good idea of your options, it’s time to look at the huge impact your choice can have on your savings. To make things clearer, let’s use high-interest savings account in the scenarios below: Canada’s banking and finance industry offers great choice. You have industry giants like Royal Bank of Canada and TD Bank. But, could also opt for smaller companies like Oaken Financial and EQ Bank. Credit unions and trust companies also offer savings accounts. You may wonder why you need to weigh your options, when you already deal regularly with a specific financial institution. You need to take a look at your money’s real potential. Say you have $10,000 in your savings account. If you’d rather transact with Scotiabank or RBC, that means you’re looking at an interest rate of 0.9%. That’s $90 in earnings at the end of the year. Put your $10,000 in a savings account under Bank of Montreal, and you’d have bigger earnings. Expect a 1.4% interest rate if you open a Savings Builder Account, which will give you $140 a year. RBC and Oaken Financial offer even more – a 1.5% interest rate, that’s $150 a year. Alterna Bank pulls it up a notch higher. Their eSavings Account offers a 2.05% interest rate, which means your $10,000 would earn an extra $205 at the end of the year. And, EQ Bank offers a 2.3% interest rate, giving you a $230 profit at the end of the year.
Other things to consider for savings accounts
Of course, interest rates aren’t everything. There are other critical points to consider… Are there other transaction fees to worry about? Does the bank offer e-transfers? If they do, do they come with an additional fee? It’s also best to read the fine print at all times. For instance, the rate you’re looking at may be a temporary one. It could be a promotional offer that will lapse after a specific time period. Make sure you check on the smallest details. This is your hard-earned money we’re talking about – it’s not something to leave to chance. At the end of the day, it’s the depth of research that will decide how well your money grows. Don’t make decisions on a whim. And, don’t wait for huge losses before shopping around for a better savings account.