In essence, everyone should have a savings account to secure a better financial future. Anyone who wishes to gain from their stagnant funds can benefit from nearly any type of savings account offered by any bank, though of course, some have higher interest rates and more privileges than others. as long as you can remain disciplined with your money and can make frequent deposits and contributions of any size, you’ll be rewarded with reliable interest payments to grow your savings just by having savings. Pretty handy, huh?
A chequing account offers the flexible banking power you need for your everyday purchases and banking needs, but good savings is absolutely essential. Canadian banks offer a variety of savings account that possess varied features including accelerated interest rates, tax-free accounts, as well as accounts better suited to students, seniors, and younger children. With the variety out there, it’s important to take your time and choose the best savings to account for your unique banking needs.
What Are the Best Savings Accounts in Canada?
|Institution||Account Name||Interest rate|
|EQ Bank||Savings Plus Account||1.50%|
|Scotiabank||Momentum Plus Savings Account||0.40%-1.45%|
|BMO||Smart Savings Account by BMO||0.40%-1.35%|
|TD Canada Trust||ePremium Account by TD||0.20%-1.10%|
|RBC||RBC Enhanced Savings Account||0.20%-1.15%|
|CIBC||eAdvantage Savings Account by CIBC||0.30%-1.10%|
Some of the best savings accounts in Canada are offered by EQ, Wealthsimple, Scotiabank, Tangerine, BMO, TD, RBC, and CIBC. Let’s take a look at each of these banks’ best savings plans available.
Savings Plus Account by EQ
The savings Plus account offered by EQ bank is the full package in terms of high-interest rate, convenience, and useful features. This savings account has an interest rate of 1.50% that is calculated daily on the closing balance of each day and is paid monthly. Unlike many other savings accounts, this EQ savings account has no minimum balance requirements or any monthly fees. It is also a more versatile account offering features similar to that of your chequing account, including bill paying, electronic transfers, day-to-day transactions, and Interac e-Transfer. Along with your Savings Plus Account, you have access to EQ’s Savings Goals tool that can help you stay motivated and have a better grasp of where you stand in relation to your financial goals.
The Wealthsimple Cash account is pretty competitive in regards to a high-interest rate and benefits to account holders. This savings account has an interest rate of 0.90% without a mandatory minimum balance. With this account, you can enjoy unlimited deposits and withdrawals without any fees applied to your account. Plus, you have coverage up to $1 million from the Canadian Investor Protection Fund. This account can also be connected to Wealthsimple’s Roundup application, which works in your favour to deposit change from “rounded-up” transactions (i.e. $4.93 à $4.95) directly into your account, helping you save without even noticing.
Momentum Plus Savings Account by Scotiabank
Scotiabank’s Momentum Plus Savings Account is unique in that they actively encourage account holders to save better. They accomplish this arduous task by allowing customers to choose a premium period of either 90, 180, 270, or 360 days in which they cannot make transfers, withdrawals, or debits out of their savings account. If successful, their interest rate increases to pay out more for your effort. The starting interest rate is 0.15% but increases to 1.25% for the 360-day premium period. If customers sign up for the Scotia Preferred or Ultimate packages, the interest rate will increase by an additional 0.05% or 0.10% respectively.
Savings Accelerator Account by Scotiabank
The Savings Accelerator Account by Scotiabank offers a 1.00% interest rate as long as you maintain a balance of $5000 or more. with this account, you can enjoy unlimited transfers to your other Scotiabank accounts without any penalties or fees. This is the alternative to their Momentum Plus Savings Account if you’d like to be able to transfer money out of your account when necessary and still enjoy a higher interest rate.
The top savings account with Tangerine bank is their Retirement Savings Plan account which allows account holders to put away money for their retirement without it being taxed during their working years. This account has an interest rate of 0.15% and all contributions to this account can be claimed and deducted from your yearly income tax. If you sign up during their promotional period, you can take advantage of a 2.15% interest rate for the first 5 months.
Smart Savings Account by BMO
Though BMO offers an interest rate of 1.40% on their more complicated and restrictive savings accounts, their best savings account overall is the Smart Savings Account which has no restrictions in the form of a minimum balance and still offers a competitive interest rate of 0.80%. With this account, you have no monthly fees, no monthly balance required, and a free transfer every month.
ePremium Account by TD
The best savings account offered by TD bank is the ePremium Account which has no monthly fee and no restriction on free online transfers. This account has an even higher interest rate than the High-Interest Savings Account at 0.90%. one stipulation with this account is that you must maintain a balance of $10,000 or more in your account at the end of every day of the month.
RBC Enhanced Savings Account
The RBC Enhanced Savings Account uses a tiered system to reward account holders for regular contributions and a higher static balance. You begin earning interest at a balance of $5000 and reach an interest rate of 1.50% once your balance achieves $150,000 – a pretty high bar for most people. This account allows one free debit withdrawal each month for necessary debits.
eAdvantage Savings Account by CIBC
The eAdvantage Savings Account by CIBC offers an interest rate of 1.00% and is well suited to people of all ages, from youth to senior, as well as retirees and working people of all income levels. This account does not have any monthly minimum balance, monthly fee, and allows free Interac transfers.
Best Savings Accounts in Canada
There are many different types of savings accounts to suit a greater number of users with unique spending habits, savings goals, and banking needs.
Basic savings accounts work by holding funds and paying the account holder small and steady amounts of interest earned off those funds. While the interest will build up your account slowly, you don’t have much liquidity with your money and don’t have the same fluid access that you have with the funds in your chequing account. With this type of savings account, you are obligated to pay tax on all interest paid into the account, and your bank may charge additional fees to move money from another location.
High-interest savings accounts offer a better return on your money than basic accounts. However, they usually have a few stipulations and strict restrictions to provide this higher rate. These restrictions usually come in the form of minimum deposits, account minimum balances, or restrictions on withdrawals, though usually, it is a combination of all of these.
Tax-Free Savings Account (TFSA)
With most savings accounts, you must pay tax on the interest you earn from your funds. A TFSA is different in that you can contribute to the account and withdraw your funds without paying any tax on the account. However, this benefit is offset by maximum deposit amounts per year, so you may not be able to take full advantage of the interest rates if you can’t have all of your money in your account.
A youth savings account helps younger children learn the value of saving money and guides them in developing healthy financial habits for their future. They can deposit their allowance money and watch it grow with interest – an exciting prospect for people of all ages.
Anyone over the age of 60 can open a Senior Savings Account in Canada which operates similarly to regular savings accounts but offer special interest rates and fee exemptions to account holders.
Specification: HSBC Tax-Free Savings Account
If you regularly travel to the United States, conduct business there, own property south of the border, or have dual citizenship, a US Dollar savings account may be beneficial to you. It will give you better access to US financial services and will help you overcome frustrating obstacles that exist between the Canadian and American banking infrastructure and separate currencies.
Specification: HSBC U.S. Dollar High Rate Savings Account
Best High-Interest Savings Accounts in Canada
Scout around for banks that offer you the highest interest rates on savings accounts. It will interest you to know that many banks provide interest rates of more than 2%. This is an important advantage because the possible earnings can help you keep pace with the current inflation rates in Canada.
You’ll build assured wealth in a shorter time frame. At the same time, make sure that the interest rate is not just valid for an introductory period as a promotional offer. Check if the bank will drop the interest rate after a few months.
Most Popular Savings Account
Accessing Your Funds
Typically, savings accounts don’t permit transactions like making bill payments or transferring funds when needed. But, in recent times, more banks are offering greater accessibility and flexibility. You might get the benefits of a chequing account combined into a savings account. Being able to access your funds and make withdrawals should be high on your list of priorities. Check with the bank for the number of transactions allowed and the charges for each.
Making Transactions and Withdrawals
Even though you’ll use the savings account for future expenses, choose a savings account that permits easy withdrawal with the minimum fees. For instance, check with the bank for the charges you’ll pay in case you withdraw cash or conduct point-of-sale transactions. Many banks allow you to make a fixed number or an unlimited number of transactions or e-transfers without incurring any fee. Accordingly, choose the bank that offers the terms that best match your spending habits.
Taxes Incurred on the Earnings from HISAs
An important factor to keep in mind when signing up for a high-interest savings account is that the interest you earn is taxable and there is no limit on the amount of funds you can deposit. HISAs fall into the non-registered accounts unlike other savings options like stocks, Guaranteed Investment Certificates (GIC), Registered Retirement Savings Plan (RRSP), and Tax-Free Savings Account (TFSA). Since the interest earned is income, you’ll pay the applicable tax according to the yearly income bracket. Your bank will send you a year-end tax form, much like the form you receive from an employer.
If you would prefer a savings account that does not incur taxes, consider the Tax-Free Savings Account (TFSA). The earnings from this account will not incur any tax. Further, you can avail of benefits such as an increased limit on the contribution limit for each year that is reset at the end of the year. Alternatively, go for the Registered Retirement Savings Plan (RRSP) which again, does not carry any taxes. However, since this is a fund specifically designed for retirement, you’ll pay taxes on making withdrawals.
How does interest work with savings accounts?
With interest, your savings account will grow over time. The average for savings account interest in Canada is roughly 1.5%, frequently closer to 2% than to 1%. Over time—typically each month—savings accounts will receive additional funds based on the balance of the account. That additional money is calculated by the interest rate. For example, if you open a savings account with $200 and then add $100 to it for 12 months, you will end up with $1400 in your name at the end of year (without interest). Then, the bank will calculate the interest. If the bank has a 1.5% interest rate for your savings account, it will give you an additional $21 (1.5% of $1400) on the month that your savings account hits $1400 Then, the bank will calculate the interest. If the bank has a 1.5% interest rate for your savings account, it will give you an additional twenty-one dollars (1.5% of $1400) on the month that your savings account hits $1400.
What about taxes on savings accounts?
Sometimes you can obtain a TFSA (Tax-Free Savings Account), but that is not always the case. In some instances, your savings account’s interest will be taxed by a certain percentage. On average, the tax is only about a tenth of a percent. If the account in the above example were taxed by .1% on the $21 increase, you would lose approximately two cents. Overtime, however, this number would grow. Also, the tax rate on your savings account might increase based on how much money you have.
Final thoughts on savings accounts
Opening a savings account is a simple and low-risk way to allow your money to grow over time. Most banks will allow you to access your savings account at any time, and several banks offer TFSA (Tax-Free Savings Account) options to their clients. A savings account is also a good way to aid in managing your own money, as it allows you to have a special and safe place to store your money for the future.
Best savings accounts to choose from
Here are examples of some of the best savings accounts:
Specification: motusbank High interest savings account
Specification: HSBC Tax-Free Savings Account
Specification: TD Bank Every Day Savings Account
Choosing Between a Regular Savings Account and High-Interest Savings Account
When considering your options, you’ll learn that regular savings accounts earn a lower rate of interest of around 1.05% or lower. However, the HISAs provide interest rates of 2% or higher. And, that makes HISAs a more attractive savings option. At the same time, you’ll want to compare the terms and conditions and choose an instrument that works well for you. Also, compare the features of the savings accounts offered by different banks and credit unions.
The folks at offerhub.ca have listings of side-by-side options that you can view and compare. Make your choice after weighing the different features of the options available out there.
Keep in mind that this is not an exhaustive list of savings accounts in Canada, so if you didn’t read about an account that fits your lifestyle and banking needs and goals, there are many more great options out there waiting to be discovered. With the availability of savings accounts out there, you should have no problem finding one that works for your unique situation.