Having a savings account is important for many reasons. Not only can it provide you with money for things that you may need to buy in the immediate future, it can also help you prepare for retirement or get you through an unexpected crisis such as a weather sensitive, home renovation expanse.
If you live in Canada or are planning on spending a considerable amount of time there, you have a number of options when it comes to savings accounts. These include:
1. Regular Accounts
Regular savings accounts are the most basic type of savings accounts available in Canada. These accounts typically offer only slightly better interest rates than what you can earn with a Canadian chequing account. They are also usually the most flexible of all savings accounts in the country. This means that there are little restrictions in terms of who can open them, and they have the fewest limitations in terms of minimum balances and making withdrawals.
2. High-Interest Accounts
High-interest savings accounts in Canada, which are also known as HISAs, offer better interest rates than regular savings accounts, and sometimes the differences between these rates can be significant. However, while still being very flexible, these accounts generally are more restrictive. Some limit the number of withdrawals that you can make during the month, while others restrict you from making cash withdrawals. Also, the best rates for these types of accounts are often found in online-only banks as opposed to the brick-and-mortar variety that many people are familiar with.
Because of all these restrictions, it is important for you to thoroughly research your options before selecting one of these accounts.
3. Tax-Free Accounts
Tax-free savings accounts (TFSAs) are a special type of savings account that are free of the taxes on interest that you would usually have to pay. What’s more, you can withdraw this money at any time tax-free, and neither your contributions nor your withdrawals will affect any government benefits that you are entitled to receive.
There is just one catch to TFSAs: you are limited in the amount of money that you can contribute to these accounts on a yearly basis. In 2020, this limit is $6,000. But this amount is steadily increasing. By 2030, it will be $7,500 per year.
4. Senior Accounts
If you are 60 or older, you may want to consider a senior savings account. These accounts can offer you a slew of benefits that you may not get elsewhere, such as:
- lower minimum-balance requirements
- lower transaction fees
- higher interest rates
Like with other types of savings accounts in Canada, the terms of senior accounts can vary greatly by bank. So, you should carefully research them before making a selection. You may even find that you can get a better deal with an HISA or another type of account.
5. Children’s Accounts
Just like seniors in Canada can open special savings accounts, so can the parents of children 18 and younger on the behalf of these children. These accounts offer similar benefits to senior accounts while helping children learn how to save. Keep in mind that these accounts often offer low interest rates or have special restrictions, such as requiring that the parents of new accountholders also have an account there as well.
6. U.S.-Dollar-Denominated Accounts
You can also open a savings account in U.S. dollars. This type of account can provide you with a host of benefits, especially if you are an American living in Canada, or you are a Canadian who often travels in America or makes purchases there. What’s more, because of a recent law, these deposits are insured just like Canadian-dollar-denominated accounts.
However, the interest rates offered on these accounts are currently very low.
There is no shortage of good options when it comes to Canadian savings accounts, and if you do have trouble deciding which to choose, keep in mind that you can always choose more than one.