Savings accounts are a good place to save for short-term goals or keep cash for emergencies. Once you’ve built up some savings, look at other options for making your money earn more. You can open a savings account at most banks, trust companies, and credit unions.
How savings accounts work
1. You will earn some interest on the money in your account. Savings accounts usually pay slightly more interest than you would get in a chequing account.
2. You may get a higher interest rate if you keep more than the minimum balance in your account.
3. You can deposit any amount of money at any time. Your employer may be able to deposit your pay directly into your account.
4. You can get money out of the account easily and quickly by:
• using a debit card
• withdrawing cash at a bank machine (ATM)
• withdrawing cash through a branch teller.
5. There may be daily limits on how much you can withdraw.
6. Your money is protected, up to set limits, through theCanada Deposit Insurance Corporation (CDIC). This doesn't apply to U.S. dollar accounts.
7. Fees vary, depending on the type of account you choose.
Savings accounts — especially high-interest accounts — usually pay slightly more interest than you would get in a chequing account.
Other things to consider
- Low return– Your money will earn interest in a savings account, but probably not as much as in some other, low-risk investments. It also may not keep up with inflation.
- High costs – You may be charged high fees for making transactions.
- High taxes on interest – The interest you earn will be fully taxed. The income you earn from some other kinds of investments can be taxed at a lower rate.