Photo credit: Shutterstock

Guide to Savings Accounts in Canada

Advertiser Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.
Last updated on August 8, 2022 Comments: 16

While a chequing account provides the flexibility and purchasing power necessary for your everyday banking needs, a good savings account is just as crucial to your overall financial security. But how do you know if you’re utilizing your current savings account to its full potential, or for that matter, if it’s truly the best account to meet your short and long-term savings goals?

Our overview will tell you how savings accounts differ from chequing accounts, what role they should ultimately fill in your finances, and how to choose the right savings account to meet your needs.

What Is a Savings Account?

A savings account can be opened at a bank, credit union or other financial institution. It’s intended to house money that you do not expect to use in the immediate future and on which you’d like to earn a favourable rate of interest. A savings account’s relative liquidity usually makes it a particularly good place to stash funds you’d like to earmark for anticipated expenses, like a wedding or home renovation, or for an unexpected emergency.

While chequing accounts are meant for day-to-day use and support frequent withdrawals, transfers, bill payments, and other banking needs, savings accounts tend to limit those transactions. In exchange, banks are prepared to pay out more interest on a savings account than on a chequing account, because they want to encourage you to leave your deposits with them for as long as possible. This allows financial institutions to fund their other services, such as providing loans and mortgages.

What Are the Best Savings Accounts in Canada?

Savings AccountBest ForMax Savings Interest RateFeesSee Review
EQ Bank's Savings Plus AccountHigh-Interest Savings/HISA1.65%*$0Read more
Wealthsimple CashHybrid Savings-Chequing0.75%$0Read more
Scotiabank Ultimate PackageBundled Bank AccountsUp to 4.05% interest on your MomentumPLUS Savings Account1$0* Read more
EQ Bank TFSATax-Free Cash Savings1.65%*$0Read more
Scotiabank RESPSaving Cash for TuitionN/ANoneRead more

*For EQ Bank: Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

* No monthly account fee by maintaining a minimum daily closing balance of $5,000 in your Ultimate Package, or a combined balance of $30,000 across your Ultimate Package and your MomentumPLUS Savings Account

¹ Conditions apply. Actual interest rate will vary based on the savings period (the Premium Period) that applies. Visit scotiabank.com/mpsa to learn more.

EQ Bank

Best for High-Interest Savings

Apply Now

EQ Bank ensures that its Savings Plus Account is the complete package, with a robust interest rate of 1.65%* and no monthly fee or minimum balance. Aside from being a great savings vehicle, it’s also enhanced with some of the features of a chequing account, including free Interac e-Transfer®, bill pay, electronic funds transfers and day-to-day transactions. Finally, we appreciate EQ Bank’s Savings Goals tool, which helps customers visualize their proximity to their goals and stay motivated to accomplish them.

Click here to open a Savings Plus Account or learn more by reading our complete EQ Bank review.

*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

Wealthsimple

Best for Hybrid Savings-Chequing

Wealthsimple Cash currently functions primarily as a peer-to-peer payment app—you can load money to your Wealthsimple Cash account and then send payments to anyone on your contact list for free. But we’ve included it on this page because the account also has the added benefit of a respectable 0.75% interest rate on its balances. Wealthsimple Cash also boasts unlimited withdrawals and deposits without fees or penalties, as well as no minimum balance requirement. Balances are insured up to $100,000 via the CDIC.

Wealthsimple is still officially planning on rolling out a number of other hybrid, chequing-like features for this product, including direct deposit, bill pay, pre-authorized debits, and a card that can be used to make ATM withdrawals and at-the-counter payments; but note that these features don’t have an anticipated launch date.

Learn more by reading our complete Wealthsimple Cash review.

 

Scotiabank Ultimate Package

Best for Bundled Bank Accounts

Apply Now

Scotiabank offers added savings incentives to those that bundle multiple bank products under the Scotiabank Savings umbrella, and its Ultimate Package, allowing accountholders to earn up to 4.05% interest on their Scotia MomentumPLUS Savings Account1.

Aside from increased savings interest, the Ultimate Package also provides a number of other banking benefits, like a special chequing account, where you can earn Scene+TM points for the debit purchases you make; and an annual fee waiver on select Scotiabank credit cards.2 The Ultimate Package typically has a high monthly fee of $30.95, but this is waived if you keep a daily closing account balance of $5,000 or more, or a combined balance of $30,000 across your Ultimate Package and your MomentumPLUS Savings Account1.

¹Conditions apply. Actual interest rate will vary based on the savings period (the Premium Period) that applies. Visit scotiabank.com/mpsa to learn more.

2Conditions apply. Visit www.scotiabank.com/ultimate300 to learn more.

TM Trademark of Scene IP LP.

®Registered trademarks of The Bank of Nova Scotia

Click here to apply for the Scotiabank Ultimate Package

EQ Bank TFSA

Best for Tax-Free Cash Savings

Apply Now

Those who prefer to hold cash in a TFSA rather than investments should seek out the TFSA with the highest cash interest rate available, and as few restrictions and fees as possible. EQ Bank currently offers a high 1.65%* interest rate, with no minimum balance, no withdrawal fee, and no fee for transferring the TFSA to another financial institution. It’s the best low maintenance, tax-free savings option for those with short-term savings plans who want to avoid the ups and downs of investment TFSAs.

The only drawbacks to the EQ Bank TFSA are: A. It’s not available to residents of Quebec and B. You can’t open the TFSA directly; you first need to open an EQ Bank Savings Plus account, transfer your funds to that HISA, and then you can transfer the funds to the TFSA.

Click here to open a TFSA or learn more by reading our complete EQ Bank review.

* Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.

Scotiabank RESP

Best for Saving Cash for Tuition

ScotiabankScotiabank is a good fit for those who plan to hold cash savings in their RESP, as Scotia RESPs are compatible with a number of different grants (including some provincial grants), and Scotia offers both individual and family RESPs.

Types of Savings Accounts

Saving money Canada

Image source: Shutterstock

Because savings accounts are so universally beneficial, there are different types available to suit every individual.

Basic

A basic savings account is one that operates in the standard manner of holding customer funds and paying them small amounts of interest, which will in most circumstances be subject to income tax. Remember that some banks may charge fees for depositing money or moving it from another account, so factor this into your calculations as well.

High Interest

High InterestWith the advent of digital banking, there are now special accounts that offer a higher rate of return than what you’d receive with a basic savings account. When looking at these high-interest savings accounts (HISAs), be sure to pay close attention to all the fees and stipulations involved, because the higher interest rates offered may be offset by a higher minimum deposit or tighter restrictions on withdrawals.

Tax-Free Savings Account (TFSA)

Interest earned in most savings accounts is subject to income tax, and typically you must report how much savings interest you collect each year to the Canada Revenue Agency. But with a Tax-Free Savings Account (or TFSA), anyone over 18 can contribute and withdraw their money without paying taxes. In exchange for this advantage, the Canadian government imposes a limit on how much can be deposited in a TFSA each year.

If your savings goals are short term, with a planned date of withdrawal in less than 10 years, you might elect to hold cash only in your TFSA so as to minimize the chances of losing your money in a dipping market. For most long-term saving scenarios it makes more fiscal sense to hold diversified investments rather than cash in a TFSA, as over time a balanced investment portfolio will likely see gains that outpace whatever interest rate is offered for a cash-only TFSA. If you already have some investing savvy and are comfortable making your own trades independently, you can open a TFSA with a self-directed online broker like Questrade. If you prefer pre-built portfolios that are automatically rebalanced you might instead open a TFSA with a robo-advisor, like Questwealth Portfolios.

Registered Education Savings Plan

A Registered Education Savings Plan (RESP) is designed to help you gradually save the funds you need to pay for the post-secondary education of children in your care. 20% of your contributions to an RESP are matched by the Canada Education Savings Grant, up to $2,500 in annual contributions you make. Money withdrawn from an RESP is treated as taxable income for the student beneficiary, but because most college students have a very low income this typically amounts to very little paid in taxes.

Like a TFSA, an RESP can hold cash or investments. Those with a relatively short savings horizon, i.e. students anticipated to start post-secondary studies in less than 10 years, might prefer the security of holding only cash in an RESP. Students with more than 10 years to go before starting post-secondary education will likely benefit more from an investment-based RESP, like the Education Target Date Portfolios offered by robo-advisor Justwealth. The mix of investments in these portfolios is timed to coincide with the future date that a student is expected to begin their post-secondary studies, with investments in the portfolio gradually rebalanced from being high risk to low risk as the date approaches.

Hybrid

Hybrid bank accounts combine some of the features of a high-interest savings account and a chequing account. Hybrid accounts are usually offered by digital banks, and typically provide a high interest rate on funds held as well as a limited number of chequing-like transactions, such as debits, bill payments, withdrawals, or Interac e-Transfers®.

Bundled

Some financial institutions offer special incentives to customers that bundle more than one of the institution’s products, for instance using a chequing account, savings account, and credit card all from the same bank. A good bank bundle should include a higher savings account interest rate than would be available should you take out the same savings account individually, rather than as a component of a bundled package.

Youth

Generally opened by adults on behalf of their children or grandchildren, or even by enterprising young savers, a Youth savings account helps kids learn key lessons about money management. They can deposit money and watch it grow with interest, and some banks make educational materials available to reinforce the importance of proper financial health.

US Dollar

Savings accounts can also exist to hold foreign currency, such as the US dollar. For those who do business in the United States, own property there or need greater access to US financial services, having a USD savings account can help overcome obstacles that exist between the two countries’ banking infrastructures and separate currencies.

Senior

Senior couple bankingCanadians who are 60 and older can avail themselves of the country’s selection of Senior savings accounts. These operate in the same manner as regular savings accounts, but will often give special fee exemptions or interest rates to older account holders.

Who Should Get a Savings Account and Why?

Should you get a saving account?

Image source: Shutterstock

Those with money sitting in cash, or with funds that they will have no immediate need for, would be very wise to evaluate savings account options. Here’s why:

  • Better rate of interest than a chequing account. Most banks pay no interest or a fraction of a percent on chequing accounts, while some savings accounts in Canada may offer more than 2% interest.
  • Your money is not locked in. You don’t have to wait until the end of a specified period to withdraw your funds, as is the case with GICs and many other investments.
  • You will achieve your savings goals more quickly. Research shows you are less likely to spend money that is specifically and separately allocated as savings.

Just don’t forget that a savings account is indeed meant for savings, not for daily banking. If your intention is to treat your savings account like a chequing account that pays a better rate of interest, you may end up shelling out more in fees than you earn in interest—depending on the account you choose.

How Are Savings Accounts Taxed?

Canadians must pay income tax on savings account earnings—unless the account is in a registered tax shelter, such as a TFSA. Financial institutions send you a T-5 slip (Statement of Investment Income) that specifies how much income your savings account deposits earned during the year, and you must declare that full amount on your annual tax return (there’s a separate line item for it).

Other forms of investment income are more tax efficient, as only a portion of the earnings is added to your taxable income. For example, only 50% of a capital gain (the increase in value on an investment between the time you bought and sold it) is taxable.

How Much Can You Really Save?

Curious about how much you can save with one of the above accounts? Use our calculator below to find out how much your savings will grow at a given monthly deposit and interest rate, or how much you’ll need to tuck away every month to reach a specific savings goal. Click here for a more detailed explanation of how to use the calculator.

Don’t Skip Out on Your Savings

A savings accounts is a critical, interest-bearing tool that should absolutely be a part of your total cache of financial products, no matter what your personal financial circumstance may be.

Remember that this list of accounts isn’t exhaustive and we’ve merely scratched the surface of all the excellent savings accounts available from Canadian banks. If you didn’t see one that fits your lifestyle, just let us know by leaving a comment below or shooting us an email, and we’ll be happy to make a suitable suggestion or two.

Author Bio

GreedyRates is Canada’s go-to resource for all things personal finance. Our expert articles and videos cover every topic under the financial sun, including credit cards, credit scores, loans, bank accounts, budgeting, investing, RSPs, TFSAs, GICs, taxes, and more. Want our advice on a personal finance issue? Send us an email at [email protected] and we’ll gladly give you some free tips.

Article comments

16 comments
CHERRY SHEUK KING CHAN says:

HI,
My cousin from the US is going to transfer $15,000 to my Canadian saving account, I am not sure how this one work, will I have to pay tax on that $15,000. What is best way to process this transfer. Thank you for your help.

Daniel from GreedyRates says:

Hi Cherry,
Fortunately, there is no gift tax in Canada- you won’t be charged any taxes on the amount you receive. On the other hand, the US does impose a cross border gift tax on the donor at anywhere between 18-40% of the gift. Exclusions do apply so it will be worthwhile for your cousin to reach out to a tax planner to minimize the impact of this tax. Hope this helps.

MK RAVITHILAKH says:

MY SON STUDY IN CANADA AUGUST INTAKE 2020 FALL MONTREAL SO WE NEED SAVING ACCOUNT TO MY SON WHICH BANK IS BEST AND ALSO BANK ACCOUNT OPEN IN AT PRESENT INDIA TAMILNADU CHENNAI KINDLY REPLY

Nate Siegel says:

Hey Mk,

Appreciate you coming to GreedyRates! If your son is coming to study at one of Canada’s great schools, then you’re right to want a bank account for him. We feel that you’ll be most comfortable with one of the “Big Five” banks, which are chartered and will be able to more capably handle wire transfers from your current bank in India. You’re correct that a savings account will be important, but as a student, he will also need money to spend without incurring fees. A chequing account and debit card are excellent, relevant tools for this purpose and will allow you to make a deposit for him to spend over time, no credit or lending involved.

We recommend Scotiabank highly, as it offers accounts for those one work or study permits who have an ID. In terms of debit cards, Scotia will be able to provide, but we’re also eager to recommend CIBC as well, as your son’s account will come with unlimited free Interac e-Transfers, which will make transacting between you two cheaper. We recommend letting your son brush up on the skills he’ll use over here, and call an agent from CIBC, Scotiabank, RBC, BMO, TD, or MBNA to get started.

GreedyRates

Kristy White says:

I recently received 50,000 from a grandma what is the best option for me to earn interest on that if I don’t plan on touching it for at least a couple years

Nate Siegel says:

Hi Kristy,

Congratulations on your recent gift! With $50,000, you should be able to set up a nice nest egg which grows over time, but you’re right to be searching for the financial instrument that’ll help this happen. First, we think you should max your RRSP if you haven’t already. You do intend to touch the lump sum, even though you don’t plan on it for a couple years, but we think using part of it for retirement is a very forward-thinking idea. Another suggestion that fits your timeline perfectly is a Guaranteed Investment Certificate (GIC), which can be held in your savings account for a fixed period for a fixed interest rate.

GICs can also be held in a Tax-Free Savings Account, which is something you should consider now that you’ve got some money to play with. TFSAs keep it safe from exorbitant taxation, as you probably know. For any savings account, you’re going to find the highest interest rates on your money with on online bank like motusbank, Alterna, EQ, and others. Their GICs can get upwards of 3.00%, which is quite competitive.

GreedyRates

Marina says:

Hi there! I am looking at opening a joint savings account with my partner to start saving for a wedding and am wondering which savings account you would recommend that is easy to access and transfer funds into & out of while incurring interest? We currently bank at different institutions: one of us banks with CIBC and the other banks with TD & Meridian. We have around $5000 we are looking to deposit into the account to start. Would you have any suggestions? Thank you!

The GreedyRates Team says:

Hi Marina!

Great questions. If you’ve already got a decent amount saved, you’ll likely be able to achieve an accelerated interest rate when you deposit that $5,000 to a “Big Five” chequing account such as the CIBC eAdvantage Savings account. Since you already bank with CIBC, this could be preferential. By keeping your balance at $5,000 or more, the account earns an impressive 1.00% interest, so all you really need to do is call up CIBC or go into your branch, open the account and make the transfer. It’s even easier to apply online as an existing member.

If you and your partner would rather bank with an online-only bank, then you’ll enjoy higher interest rates without the minimum deposit, but you’ll also lose access to in-person customer service. EQ, for instance, offers upwards of 2.30% without any bonus or promotion, or fees or minimum balances. Compare these two options and you won’t go wrong with either!

GreedyRates

Gary Cole says:

CIBC eAdvantage. Can’t find that 2.3% rate. The site offers 1% with $5 transaction fee.

The GreedyRates Team says:

Hey Gary,

The Big Five tend to switch their promotion faster that we can stay on top of them, and it seems as though CIBC is no exception with their once impressive eAdvantage account. Whereas before there was a bonus introductory interest rate for those who deposited over $5,000, there’s now a still-competitive rate of 1.00%. If you’re looking at the interest rate as the only feature to focus on, then we’d suggest saving your money with an online-only bank, which are able to offer higher rates given that their operating costs are much lower. Check out EQ and motusbank in this case. Thanks for the question, and good looking out!

GreedyRates

Diana says:

Hi, is there a maximum amount of money you can transfer (remove) from your EQ Bank Saving Plus account?

The GreedyRates Team says:

Hey Diana,

Thanks for coming to GreedyRates. If you’ve got an EQ Bank Savings Plus account, then you’ll only be able to withdraw as much money as you’ve deposited into it. Savings accounts don’t extend credit so if there’s no money in the account from a deposit you (or someone else) has made to it, there’s no money to withdraw either. The fine print does specify that “We may establish dollar amount, transaction, account balance or other account-related limits per customer.” However, this is typical bank boilerplate and concerns suspicious transactions like large deposits. Enjoy the account – and if you have any other inquiries about it just let us know!

GreedyRates

Dan says:

Could you compare High interest saving accounts for US dollars in Canada? Thanks

The GreedyRates Team says:

Hey Dan,

Appreciate the comment! We’re sorry that we weren’t more thorough in the article about USD savings accounts in Canada, but there are absolutely accounts out there for you. HSBC, Scotia, and Tangerine are three banks we know of that offer USD savings accounts, but we haven’t done the kind of research we’d like on these accounts to recommend anything specific. In fact, there’s a high chance that your own bank offers a USD savings account, so approach them and begin comparing your options. Make sure to look at factors like the exchange rate, monthly administration fees, interest rates (of course), self-service and in-branch service fees, the ease of transfers between banks and CAD and USD accounts, and minimum balances. If you’d like help figuring out which is best, once you have a few accounts you’re considering, we can surely provide it! Just email us at [email protected]. Thanks!

GreedyRates Staff

Victoria says:

I’m looking for highest interest savings account for me to deposit my 20 0000 into

The GreedyRates Team says:

Hi Victoria,

Thanks for the question about best-value interest accounts for saving in Canada. If you have $200,000 to put in a savings account, then consider the RBC Enhanced Savings account, which offers a ceiling of 1.50% interest on balances over $150,000. That’s a pretty great deal, and still allows you some freedom with the $50,000 that you don’t need for max-rate eligibility. Another excellent option that we like is the EQ Bank Saving Plus account, which offers 2.30% interest without a minimum balance or monthly fee. It’s currently one of the best savings accounts for higher interest in Canada and boosts its value proposition further by providing 5 free Interac eTransfers per month. Let us know if that answers your question or if you’d like to explore alternatives. Thanks very much!

GreedyRates Staff