Chequing or savings? It’s a question we’re prompted with every time we make a cash withdrawal from an ATM machine or pay for anything in-store with a debit card. Chequing accounts are fairly straightforward: they are used for everyday transaction including withdrawal, deposits, bill payments, etc. For those reasons, chequing accounts are where most people place all of their funds for quick access when they need it. Savings accounts have always been a trickier sell, especially to younger customers or those who may not have much extra money to put aside.
5 Best Savings Accounts in Canada 2023
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Below we will break down what a savings account is, the best savings accounts in Canada, the types of savings accounts available, interest rates, and everything else you’ll need to know to start saving money today!
What are savings accounts?
As the name suggests, a savings account is any sort of account at a bank, credit union, or any sort of financial institution where you are placing funds to use in the future. Like a piggy bank, you are placing your money in a savings account to use at a future date (and unlike a piggy bank, the hope is to also grow your money while saving it).
You may be saving money for school, a large purchase like a home or a new car, a trip abroad, or simply to ensure you don’t spend it while it sits in your chequing account. Many also like the security of knowing they have money put away in case of an emergency or an unexpected expense. It’s definitely a weight off your shoulders to know you’re financially prepared for anything life may throw your way.
Even if you don’t think you have much extra money to “save,” a savings account is still worth looking into. While the amount of interest in your savings account may be relatively small, your money makes next to zero interest in a chequing account. Any funds you can transfer to a savings account will be worth the effort, and can especially pay off long-term.
A Round-up of the Best Savings Accounts in Canada:
Best Interest Savings Account: EQ Bank Savings Plus Account
Best Hybrid Savings Account: Neo Financial Money Account
Best TFSA Account: Tangerine Tax-Free Savings Account
Best RRSP Account: EQ Bank RSP Account
Best RESP Account: Questrade RESP Account
Best savings accounts in Canada
Ready to start saving? Here are the most popular types of savings accounts available in Canada:
Best Interest Savings Account
EQ Bank Savings Plus Account
- Regular Interest Rate 2.50%
- Promotional Rate N/A
- CDIC Insured Yes
EQ Bank is an online bank that offers a strong interest rate of 1.25%. There are no minimum balance requirements (although there is a maximum balance of $200,000). You also get unlimited free transactions and free Interac e-Transfers. EQ Bank is owned by Equitable Bank, which has been in business for over 50 years, so you can trust that you will be in safe hands.
*Rates current as of April 2023
Neo Money
- Welcome Offer $5 sign-up bonus once approved
- Minimum Deposit $0
- Monthly Fees $0
- Interest Rate 2.25%
- Transaction Fees $0
Best TFSA Account
Tangerine Tax-Free Savings Account
- Regular Interest Rate 1.00%*
- Promotional Rate 5.00%*
- CDIC Insured Yes
With the Tangerine Tax-Free Savings Accounts, you’ll earn 5.00% interest on your deposits for the first 5 months your account is open when you use the promotion code “EARNMORE” as a new customer. After that, the regular interest rate is 1.00%. This savings account will have no monthly fees or minimum balance, and its savings program allows you to easily set up automatic deposits on a weekly or monthly basis (or any schedule you prefer).
*Rates current as of April 2023
Best RRSP Account
EQ Bank RRSP Account
- Regular Interest Rate 3.00%*
- Promotional Rate N/A
- CDIC Insured Yes
EQ Bank makes our list once again with their RRSP account, which offers a competitive interest rate of 3.00%. There are no minimum balance requirements or monthly fees, and you can set up automatic deposits to help you meet your savings goals. Your account is insured by the Canadian Deposit Insurance Corporation (CDIC) for up to $100,000, so you can rest easy knowing that your savings are secure.
*Rates current as of April 2023
Best RESP Account
Questrade RESP
- Fees 0.20% - 0.25%
- Investment Type Self-directed or portfolios
- CDIC Insured No
Questrade gets our pick with their mix of low management fees (0.25% for accounts under $100,000 and just 0.20% for accounts over $100,000) and customizable savings and investment options. You can opt for Questrade to manage your investment, or opt for a hands-on self-directed option if you want to oversee your RESP investments. Either way, you’ll be contributing to your family’s education savings goal while earning a competitive interest rate at the same time.
Best savings accounts in Canada summary
| Best Of | EQ Bank Savings Plus AccountAccount Name | Interest Rate |
|---|---|---|
| Best Interest Savings Account | EQ Bank Savings Plus Account | 2.50% |
| Best Hybrid Savings Account | Neo Money Account | 2.25% |
| Best TFSA Account | Tangerine Tax-Free Savings Accounts | 1.00% (5.00% promotional rate) |
| Best RSP Account | EQ Bank RSP Account | 3.00% |
| Best RESP Account: | Questrade RESP Account | Based on investments |
Types of savings accounts in Canada
Interest savings account
An interest savings account will pay you an interest rate on the funds you keep in the account. This is the most basic type of savings account available. While the interest rate is fairly low (usually topping up at just over 1%), it’s still a better option than keeping money in your checking account where it earns as little as 0.010% interest.
Hybrid savings account
A hybrid savings account combines the day-to-day uses of a chequing account (deposits, withdrawals, bill payments) with the ability to earn interest on your balance. If you’re looking for a savings account but still want to retain the everyday banking options provided by a chequing account, a hybrid savings account is a great option.
TFSA
A TFSA (Tax-Free Savings Account) allows you to save money in a couple of ways. The funds you add to your TFSA can be invested in a variety of options, all of which can be used towards your savings goals. The real benefit of a TFSA is that any money you earn on those investments is tax-free for life, allowing you to save money twice on the same initial investment. You can also withdraw from your TFSA at any time without penalty.
RRSP
An RRSP (Registered Retirement Savings Plan) is best for long term savings goals, but also has an annual advantage if you contribute each year. An RRSP is designed to provide funds for your retirement. The short term benefit is that money you add to your RRSP lowers your taxable income for the year, which in turn means you have less taxes to pay. With an RRSP, you are essentially paying yourself twice with the same money: you are contributing to your retirement fund, while also lowering your taxable income for the year. The drawback of an RRSP is that the income you withdraw is taxable (if you withdraw funds before your retirement). The only exception for this is Canada’s first time homebuyer plan, which allows you to withdraw up to $35,000 from your RRSP tax-free to purchase your first home.
RESP
A Registered Education Savings Plan (RESP) is a plan designed to help families pay for their children’s post-secondary education fees. The money you contribute to your RESP grows tax-free until you eventually withdraw it to pay for tuition, so you are deferring those payments until that time. Best of all, the Canadian government will match 20% of your RESP contributions (up to $2,500 per child, annually). Education is expensive; why not let the government chip in?
How to choose the best savings account
Choosing the best savings account in Canada should be based on your particular needs and savings goals. Here are some more factors you should consider when choosing a savings account:
Minimum balance
Depending on which savings account you opt for, there may be a minimum balance requirement. It’s always better to opt for low minimum balance accounts so you don’t have to worry about keeping a certain figure in your account at all times.
Interest rate
Most banks will offer competitive, regular, interest rates and many will also offer higher rates as part of a promotion. The promotional interest rates are usually limited to a few months, and while they may seem enticing, make sure you are not compromising on a good regular rate.
Account fees
While most banks don’t charge you for keeping your money in the savings account, they may have a limit on the number of free transactions before they start charging you. Make sure you have prior knowledge of these transaction limits and the fees thereafter.
Online vs. brick and mortar banks
An online-only bank will often offer the best interest rates in Canada along with lower fees (if any) because their operating costs are much lower (physical locations cost money to run), and they are looking to attract new long term customers. However, you may not be able to physically meet with anyone if you have an issue or questions; you will have to head online for any customer service inquiries, which may take longer than making an appointment at a traditional bank.
A traditional bank will have higher fees and a lower interest rate, but they make up for it in terms of convenience and accessibility. A traditional bank will have ATMs available for you to use, the ability to schedule in-person meetings, as well as a larger customer service team if you have any questions or concerns.
How to open a savings account in Canada
Opening a savings account is a relatively straightforward process. If you already have a chequing account set up with a traditional bank or an e-bank, you can simply request that they also open a savings account for you with the same institution (you can also complete this process online).
If you’re opening an account for the first time, you will need two pieces of ID. Generally, institutions require two forms of government ID (driver’s license, passport, health card). In addition to the two forms of valid ID, you will need to know your social insurance number and have it on-hand. If you are under the legal age in your province or territory, you may be required to have a parent or guardian on-hand for the process. Most banks also have student banking options specifically designed for younger customers. If you’re unsure of the requirements to open a savings account in Canada, your best bet is to call or email the bank you are interested in and confirm their account requirements.
Online banks may have their own rules regarding age and eligibility requirements. Always check first before you begin the process of opening a savings account.
How savings accounts are taxed in Canada?
With a traditional savings account, any interest you earn on your investment is subject to tax. However, you won’t pay tax on the money you use to fund the account; you will already have paid income tax on that amount.
If you want to avoid paying taxes on the interest earned in your savings account, opt for a TFSA. With a TFSA, any interest you earn on your investments is not subject to income tax. (There are limits to how much you can invest in a TFSA each year; be sure to check with your bank to confirm the current limits.)
If you are using your RRSP or RESP as a savings tool, you are only taxed when you withdraw funds from either service. If you are saving for a long term goal, you won’t be paying tax on those savings until you need to take your money out.
Who should open a savings account?
There is a misconception that you need to have an excess of funds in order to have a savings account, which is simply untrue. Given the plethora of no-cost savings accounts available, everyone interested in putting some money aside (either for a large purchase like a car or a home or as an emergency fund) should consider opening a savings account. Even with relatively low interest rates, any savings account is better than keeping extra money in your chequing account, where it makes as little as 0.010% interest.
The bottom line
A savings account is a useful tool to help put aside some money for a future purpose, which can be anything from an exotic vacation to simply ensuring you have some funds on-hand for any unexpected expenses. Most accounts have no minimum balance requirements, and the recent surge in online-only banks means customers now have access to competitive interest rates higher than the major banks offer (and with less fees).
With options ranging from a standard savings account to TFSAs, RRPS, and RESPs, there is a savings option for every situation and budget imaginable. You’ll be surprised at how fast your savings can grow after you take the first step of opening a savings account. You work hard for your money; why not try to make it last as long as possible?
*Rates current as of April 2023
Gabriel Sigler
Frequently asked questions
A savings account is not a get-rich-quick scheme; the best way to look at a savings account is that it sets up a system to be sure you don’t spend every dollar you earn, and to help grow your money for any future savings goals. Even with relatively low interest rates (the highest interest rates are with online-only banks) any money you place in a savings account is earning more interest than leaving it in your chequing account (or your wallet). If you are using a TFSA or RRSP, you are also saving money in two ways; in addition to your savings amount you’ve set aside, you are saving the taxes earned on the interest with a TFSA, while your RRSP contributions lower your taxable income for the year, saving you extra money come tax season.
If you are looking for additional banking services in addition to a savings account, many banks offer a bundling option that includes extra services at a discount rate. Both online-only and traditional banks offer bundle services, which can often be customized to your particular needs and savings goals. Many banks also offer a family bundle, where all the members of a household can save on fees if they do their banking with the same company, something that can be particularly advantageous for larger families.
Traditional brick and mortar banks offer increased accessibility and customer service, but they also have the highest account fees. Many online-only banks offer savings accounts with no fees at all, which can be a great option for those looking to save as much money as possible. If you use traditional banking services like ATM machines or prefer the option of in-person meetings, a savings account with a traditional bank may be worth the extra fees. However, if you are relatively tech savvy and are comfortable with using tools like chat and email for customer support issues, an online-only bank is the best way to avoid savings account fees.
