A savings account is a good place to park money you don’t need right away. It can hold funds you need in the near future, whether you are planning to make a down payment on a home, or saving towards a vacation or wedding.
While savings accounts have many advantages, there are also disadvantages to consider.
Below, I cover the pros, cons, and features of savings accounts in Canada.
Advantages of a Savings Account
Grow your money: While you can just as easily keep your money at home for easy access, it has no chance of growing in value under your pillow.
The best savings accounts in Canada pay interest which means you earn some income over time.
Low risk: Savings accounts are safe because your money is insured by Canada Deposit Insurance Corporation (CDIC) up to $100,000 per depositor and insured category.
No monthly fees: Canadian chequing accounts can be pricy at up to $30 per month. Most savings accounts do not charge a monthly fee.
Easy to access: In addition to being free, savings accounts can easily be opened online. You can also transfer money from your savings to external banks you have linked to your account.
No lock-in periods: Unlike GICs (term deposits) that may be non-cashable or non-redeemable for a specific period of time, you can deposit or withdraw funds from a savings account at any time.
Low barrier to entry: Don’t have much money to save? Most savings accounts do not have a minimum balance requirement which means you can start saving with as little as $1.
Disadvantages of a Savings Account
Low interest rates: The interest rates offered by banks on savings accounts are abysmally low. And, your best bet for a rate that’s worth your time is with an online bank like the EQ Bank Savings Plus Account.
Variable rates: Banks can change the interest paid on savings at any time without prior warning. Fluctuating rates make it harder to budget as you can’t be certain how much income to expect.
Limited transactions: Check that your bank allows unlimited withdrawals from savings accounts. In some cases, you can only make so many transfers before transactions fees apply.
Insurance coverage limit: CDIC protection is limited to $100,000 per insured category.
Minimum balance: Some big banks have a minimum balance you must maintain to earn interest in your savings account.
In-person support: As already noted, the best savings account rates are often from digital banks that don’t have physical branches. While you can conduct all transactions using online banking, some people prefer in-person banking.
Compare the Best Savings Accounts in Canada
|Features||EQ Bank||Neo Financial||KOHO|
|Other features||Mobile cheque deposits, RSP, TFSA, and GICs||Neo Mastercard||0.50% cash back; budgeting app, free early payroll, and credit building service|
High Interest Savings Accounts in Canada
Learn about some of the top high interest savings account rates in Canada offered by digital banks.
1. EQ Bank Savings Plus Account
EQ Bank is the online banking subsidiary of Equitable Bank. It has over $6 billion in deposits and customers enjoy CDIC guarantee protection.
The EQ Bank Savings Plus Account pays up to 125x interest more than other banks with its standard 1.25% interest rate.
In addition, this no-fee hybrid account offers the best features of savings and chequing accounts, including:
- Unlimited free debits and bill payments
- Unlimited free Interac e-Transfers
- Free mobile cheque deposits
- No minimum balance requirement
2. KOHO Earn Interest
KOHO combines many of the features you’d like to see in savings, chequing, and credit card accounts.
KOHO users get access to a free budgeting app and prepaid card (no credit check or impact) that pays up to 2% cash back on all purchases. In addition, they earn a 1.20% interest rate on all balances after setting up at least one regular direct deposit to the account.
Interac e-Transfers, bill payments, and POS transactions are free. Also, you get a $20 bonus when you sign up here and make your first purchase using the KOHO Visa Card.
3. Neo Financial
Neo Financial is one of the nearest online banks in Canada.
Its Neo Savings account offers 1.30% interest and no monthly fees. Clients also enjoy:
- Free bill payments and Interac e-Transfers
- No minimum balance
- Unlimited free transactions
Neo Savings account deposits are held at Concentra Bank, a CDIC-member institution.
- KOHO vs. Moka Comparison
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Have questions about savings accounts in Canada? Leave them in the comments.