TLDR
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There are several different types of savings accounts in Canada. Common ones include basic, high interest, student and registered accounts.
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Each type of savings account has unique benefits—from high interest rates to special tax benefits.
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The best savings account depends on your financial goals. Sometimes, it’s ideal to have multiple savings accounts to save for both short- and long-term goals.
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Traditional savings accounts and investment accounts are two different things, but both can help you save for your future.
When it comes to savings accounts, having options is great—it means you have several tools at your fingertips to help you reach your financial goals. In Canada, some of these tools include:
- Basic savings accounts
- High interest savings accounts
- Joint savings accounts
- Youth savings accounts
- Savings accounts for students
- Registered savings accounts (investment accounts)
- Foreign currency savings accounts
Each one of these options offers unique benefits and opportunities to help you stash away money—and let your money earn money. This is all great news—but it’s no secret that more options can often mean more questions.
For example…what makes these accounts different from each other? Which one earns the most interest? Which one is the best fit for me? To answer some of your questions, let’s dive into the different types of savings accounts in Canada—and how you can pick the best one(s) for your goals.
Basic savings account
A basic savings account gives you a safe place to ‘stow away’ money separate from your chequing account. When you keep your savings separate from your chequing, you can take advantage of the ‘out of sight, out of mind’ principle—and savings account interest—to help your money grow.
Pro Tip: When you keep your chequing and savings accounts with the same bank, it can make account transfers easier and faster—often instant!
High interest savings account (HISA)
Most basic savings accounts offer a lower interest rate, so it’s common to look for additional options like a high interest savings account (HISA) to watch your money earn money while it sits in savings. Here’s a high-level look at the benefits of a HISA:
- Grow your money faster with a higher interest rate earned on every dollar.
- Access your money easily since there are no withdrawal restrictions.
- Enjoy peace of mind knowing you can’t lose any money you deposit—just like in a traditional savings account, your deposit is protected by the Canada Deposit Insurance Corporation (CDIC).
Keep in mind that HISA interest rates depend on market conditions, promotional offers and many other factors determined by the financial institution and economy.
Joint savings account
A joint savings account is simply a savings accounts that’s shared between two people. You might find yourself looking for a joint savings account if you’re married—or if you want to help your child learn smart money habits. With a joint savings account, the idea is to save for a common goal shared between the two account holders.
Savings account for kids
If you’re looking to share a joint account with your little one, you can choose any savings account option that meets your needs. Many banks also offer youth savings accounts, with common features like:
- No monthly fee
- No minimum balance requirements
- Free debit transactions
You can also start contributing to a Registered Education Savings Plan (RESP), which allows you to save for a child’s education and only pay taxes on the investment earnings when the money is withdrawn. When it’s time to withdraw the money, the earnings are taxed in the child’s hands—often resulting in little or no tax.
Savings account for students
Students over 18 years old have access to any savings account in Canada, so be on the lookout for accounts that have unique benefits for students.
As a student, you could also benefit from a high interest savings account (HISA)—a great option to help you earn more interest on every dollar than traditional savings accounts.
Registered savings accounts (investment accounts)
Registered savings accounts are actually investment plans registered with the Canadian government. They offer more growth potential than a savings account and can help you save more effectively for your short- and long-term goals by offering certain tax advantages—such as tax-sheltered or tax-deferred growth on your investment earnings.
One consideration? Registered accounts can be a little less flexible than traditional savings accounts. They limit how much you can contribute annually and sometimes have requirements for how long you must hold contributions in the account.
It’s important to note that registered accounts are investment accounts, not traditional savings accounts. This means that when you deposit money into the account, you want to invest the funds by purchasing various investment products to hold in it—to get the most out of your money. Some common investment products include mutual funds, guaranteed investment certificates (GICs), exchange-traded funds (ETFs), stocks, bonds and more. You can also hold cash in these accounts, but a savings deposit won’t offer the same growth potential as these other investments.
Now that we’ve covered the basics of registered investment accounts, let’s dive into the details on a few popular ones.
Tax-Free Savings Account (TFSA)
A Tax-Free Savings Account allows you to:
- Save for big-ticket items or goals—without having to pay taxes on the interest you earn on your savings1
- Contribute whether you’re employed or not
- Fund it for as long as you want—there’s no age limit
- Save in addition to your retirement contributions in an RRSP (which we’ll discuss below)
- Withdraw your money at any time for any reason2
Plus, if you withdraw money from your TFSA, you can add those funds back into the account in later years. In other words, your “contribution room” carries over indefinitely.
Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan allows you to:
- Save for retirement alongside your savings in a TFSA
- Wait to pay taxes on your investment earnings until you withdraw the money
- Potentially lower your tax bill by subtracting your contributions from your annual income
- Dip into your RRSP account to pay for school3 or your first home4—if you repay your account in the required timeframe
Like a TFSA, you can also make up for missed contribution room from previous years in an RRSP.
Other registered investment accounts
Here’s a quick overview of some other registered investment account options:
- First Home Savings Account (FHSA): Save for your first home, without paying taxes on the interest you earn in the account.5
- Registered Education Savings Plan (RESP): Save for a child’s education and only pay taxes on the investment earnings once the money is withdrawn. You can also access government grants and incentives to save even more.
- Registered Disability Savings Plan (RDSP): If you or your loved one is eligible for the Disability Tax Credit, you can use an RDSP to save while deferring taxes on the investment income.
- Registered Retirement Income Fund (RRIF): If you’re ready and eligible to start using your RRSP funds, keep your savings in an RRIF to let it continue growing sheltered from taxes.
Be sure to check out the full benefits and conditions of each registered account.
Foreign currency savings accounts
Foreign currency savings accounts allow you to send and receive money in several different currencies and buy and sell currencies when exchange rates are favourable. Most banks make it easy to manage your money with fast transfers to and from these accounts—and some even offer high interest rates.
How to find the best savings account for you
The best savings account for you depends on your goals and preferences. We put together this comparison chart for the accounts we discussed in this article to give you a look at some top pros and cons of each type.
| Your main goal | Main pro of the account | Main con of the account | |
|---|---|---|---|
| Basic | Start saving | Ease of use | Low interest rate |
| High interest | Grow your savings | Higher interest rate | Limited debits |
| Joint | Save with someone else | Two people have access | Limited individual control |
| Youth | Help your kiddo to save and build good habits | Typically, no monthly fee or minimum balance required | Low interest rate |
| Student | Save as a student | Typically, no monthly fee or minimum balance required | Low interest rate |
| TFSA | Save for big-ticket items | Tax-Free investment earnings | Annual contribution limits |
| RRSP | Save for retirement | Defer taxes on your investments | Annual contribution limits + withdrawal limits |
| Foreign Currency | Save money in another currency, like USD | Avoid unnecessary currency conversions | Lower interest rate |
What to consider before opening a savings account
You’ll want to consider several things before opening a savings account, such as:
- Interest rates: It’s important to understand how the interest rate works on your next savings account. Higher interest rates can help your money grow faster, but interest rates can also have conditions—such as limited promotional periods or ‘tiered accounts’ that only pay you more if you reach a certain balance.
- Minimum balance requirements: Will you be penalized if you withdraw too much money from your savings account? Does the savings account only pay you interest if your balance is over a certain amount?
- Ease of transfers: If you get a savings account at the same financial institution as your chequing account, it can make transfers fast and easy. Transfers can sometimes take longer when your savings account is at a different bank.
- Withdrawals: Does the account have withdrawal fees or any other restrictions? Be sure to read through all the fine print.
To dive deeper into these points, check out What is a Savings Account and How Do I Use It.
Other frequently asked questions about savings accounts
The best type of savings account is one that meets your financial goals. It’s important to compare different accounts to see which one aligns best with your needs.
In addition to traditional savings accounts, registered investment accounts can help you achieve your savings goals by offering tax advantages—so you can get the most out of your money now and later in life.
Of all traditional savings accounts, a high interest savings account (HISA) will earn the most interest on every dollar you save.
Registered savings (investment) accounts offer you the potential to earn the most money in the long run by holding investments that earn compound interest or other investment income. But it’s important to note that registered savings accounts are not traditional savings accounts and come with certain limitations (surrounding contributions and withdrawals).
There are several different types of savings accounts available in Canada. Some common ones include:
- Basic savings accounts
- High interest savings accounts (HISAs)
- Youth savings accounts
- Student savings accounts
- Joint savings accounts
Beyond traditional savings accounts, you can also save money in investment accounts, such as registered investment accounts. These accounts (listed below) are popular for their tax advantages.
- Tax-Free Savings Account (TFSA)
- First Home Savings Account (FHSA)
- Registered Retirement Savings Plan (RRSP)
- Registered Education Savings Plan (RESP)
- Registered Disability Savings Plan (RDSP)
- Registered Retirement Income Fund (RRIF)
You can open a combination of savings and investment accounts to meet your short- and long-term financial goals.
There are a few important differences between a Tax-Free Savings Account and a high interest savings account—we’ve outlined some of them in this comparison chart.
| Tax-Free Savings Account (TFSA) | High Interest Savings Account (HISA) |
| Investment account | Savings account |
| No taxes on your investment income | Pay taxes on your interest income |
| Annual contribution limits | No annual contribution limits |
| Some restrictions on withdrawals | No restrictions on withdrawals |
| Opportunity to earn compound interest | Opportunity to earn high, simple interest |
Interest rates on savings accounts are always subject to change—one account might have the highest interest rate now but not in the near future. Some financial institutions may also offer promotions for a limited-time bonus rate, so be sure to check the terms of the interest rate.
When choosing a high interest savings account, it’s important to consider the pros and cons of the account as a whole.
Assets in a TFSA must be Qualified Investments under the Income Tax Act. If the TFSA holds non-Qualified Investments, it could be subject to tax.
While you can take money out of a TFSA for any reason, your timing does depend on the investments you hold in it. For example, non-redeemable GICs must be held until maturity.
Under the Lifelong Learning Plan, you can withdraw up to $10,000 per calendar year for your own or your spouse’s full–time training or post–secondary education. The total amount that can be withdrawn is $20,000 each with withdrawals over a maximum of four consecutive years. At least 10% of the amount borrowed must be repaid each year, over a maximum period of 10 years.
You can withdraw up to $60,000 from your RRSP to buy your first home under the Home Buyer’ Plan. To be eligible, you must be a Canadian resident and considered a first-time homebuyer. The funds must have been on deposit at least 90 days before you withdrew them, and a signed written agreement to buy or build a qualifying home is required. Funds withdrawn under the HBP must be repaid to their RRSP over a 15-year period. At least 1/15 of your withdrawal must be repaid to the RRSP each year. The repayment period begins as of the second year after the first withdrawal was made under the Home Buyers Plan (HBP). For withdrawals between January 1, 2022 and December 31, 2025, the repayment period begins as of the fifth year after the withdrawal was made. For details see Canada Revenue Agency Home Buyers’ Plan.
You may be eligible to open an FHSA if you or your spouse have never owned a home in which you lived at any time during the part of the calendar year before the account is opened or at any time in the preceding four calendar years.
Information about the Tax-Free Savings Account, Registered Retirement Savings Plan, First Home Savings Account, Registered Education Savings Plan, Registered Disability Savings Plan and Registered Retirement Income Fund is based on what is currently available from the Canadian government and can be subject to change.
