Savings accounts are a good place to put money aside for short-term goals or emergencies. They typically earn interest. And having a savings account can help you develop a habit of putting money away for the future.
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What is a savings account?
Savings accounts are bank accounts that are there for just that — saving money. Your chequing account can be used for day-to-day transactions and paying bills. Your savings account can be used for putting money aside until you need it. You can open a savings account at most banks and credit unions.
Savings accounts typically return some interest monthly or annually. This amount of interest may be less than what you would expect to see from your investment returns. However, unlike some investments, savings accounts offer stability. You know that your savings account won’t go down in value unless you withdraw money from it. And with compound interest, it may grow more than you expect.
If you’re new saving and investing, it can also help to start saving first, to build the habit of putting money aside. Once you have a good idea of how much money you can save each month and are able to keep it up, you can start to plan your short-term and long-term savings goals.
How do savings accounts work?
There are two main transactions that you’ll make with your savings account:
- Deposits – You can deposit any amount of money at any time. Your employer may be able to deposit your pay directly into your account if you choose.
- Withdrawals – You can get money out of the account easily and quickly by using a debit card. There may be daily limits on how much you can withdraw.
When you choose a savings account consider these details:
- Interest – 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. You may get a higher interest rate if you keep more than the minimum balance in your account. Check the account information for the interest rate when you sign up for the account.
- Fees – Fees vary, depending on the type of account you choose. Transaction fees on savings accounts are often higher than fees for chequing accounts since savings accounts aren’t intended for day-to-day banking. Check how much transactions cost and stay up to date on account changes. Fees can change from year to year.
- Protection – Your money is protected, up to set limits, through the Canada Deposit Insurance Corporation (CDIC). This doesn’t apply to U.S. dollar accounts.
What are the types of savings accounts?
There are different types of savings accounts with different fees, features and interest rates. It’s a good idea to shop around and compare before you choose one. There are three main types of savings accounts:
- Regular savings accounts
- You earn a small amount of interest.
- You can get your money quickly and easily.
- There are often no fees.
- Combined chequing and savings accounts
- You earn a small amount of interest — usually less than in a regular savings account but more than in a chequing account.
- You can get your money quickly and easily.
- You can write cheques, but you will often pay higher fees for writing them.
- High-interest rate savings accounts
- You earn a greater amount of interest than in other types of savings accounts.
- You usually must put in a certain amount (a minimum deposit).
- You won’t get cheques or bank books.
- It may take longer to get your money out if it’s an online bank.
What fees do you pay with a savings account?
There are two types of fees that may come with your savings account:
- Transaction fees
You may be charged when you make purchases with a debit card, withdraw cash, or pay bills.
Fees for using a bank machine (ATM) are often cheaper than using a teller in a branch. But you may pay extra fees if you use an ATM from a different bank or in a different country. You may also pay a fee if you make withdrawals over the limit.
Ask about paying a set monthly fee if you have a lot of transactions each month.
- Service fees
You may be charged when you move money between accounts, update your balance or have the bank mail your monthly statement. Fees may be waived if you keep a minimum account balance.
Financial institutions compete for your business. It’s worth shopping around to compare fees and packages. Use this Savings Account Selector Tool to compare savings account fees and charges across Canada.
Savings accounts might generate less interest than the typical investment account, but they offer a secure place to hold money. Savings accounts:
- Are easily accessed when you need them.
- Earn slightly more interest than you would get in a chequing account.
- May have transaction and/or service fees.
- Have different fees, features and interest rates. It’s a good idea to compare options before choosing a savings account.