Among many other banking services available in Canada, people have the option to open up their accounts. There are several types of accounts you can open, and one of them is a savings account. Having a savings account is a smart thing. But for it to have a real effect, you need to add more money to it consistently. There are many things to consider when choosing a savings account. Go through relevant information and consider all the options available. Here is what you need to know about savings accounts in Canada.
Savings Account Explained
These accounts are financial bank accounts into which people deposit money periodically to save up that money while earning interest on the amount over time. All of them have limitations to how many times the holder can withdraw funds from it every month. That’s because these accounts are meant to be used to save money. They are for long-term financial plans and saving up for something important happening at least five years from the moment of opening the account. At the same time, it can serve as an emergency fund in case of unexpected events, health issues, or money troubles.
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Savings Account Features
All savings accounts come with different features. It depends on the bank and what their terms are. However, here are some of the essential features that you should be looking in your account:
- Instant use. Most saving accounts can be opened in a matter of minutes. No matter if you are applying for one online or in-person, you should expect your account to be operational instantly.
- No minimum balance or deposit. Saving money doesn’t always go as planned, which means that you won’t always be able to make the same payments as you planned. At the same time, you never know when an emergency might pop out. For these reasons, it’s best to find an account that has no minimum deposit or balance requirements, so you can save up as much as you want whenever you want.
- CDIC insurance. The Canada Deposit Insurance Corporation is an important government institution of Canada which licenses and regulates banks. Banks who are members of the CDIC offer coverage to their customers. Simply put, in case the account vanishes for some reason or the bank goes down, you will be reimbursed with up to CAD 100K.
- Ability to transfer funds from other accounts. Most people want to transfer funds out of their chequing bank account directly into their savings account. You should be able to do this. Once you’ve received your monthly paycheck and you’ve organized your finances, you can instantly set aside how much you can save.
- No ongoing fees. Look for a bank that doesn’t charge any ongoing or maintenance fees for your savings accounts. After all, you want to save money over time and not spend it on your account.
Benefits of a Savings Account
You might be wondering why you should open one of these accounts? Here are some essential benefits to consider:
- They are inexpensive. Opening up a savings account might cost you a one-time fee of CAD 20 to CAD 80. However, some banks won’t charge you anything whatsoever. Some banks simply want to use people’s money to invest, which is how they make their profits.
- You don’t have to worry about saving. We always need money for something. But do we need all of those things? Most people can’t control themselves with their spending. With such an account, you can set up an automatic deposit to instantly receive payments from your paycheck at the start of the month. Set up a fixed amount, and don’t worry about saving.
- Secured savings. Believe it or not, banks give you more security than keeping money home under the mattress. Apart from the banks’ guarantee and security measures, you can also rely on CDIC insurance, so that your money won’t go to waste in any given scenario.
- Save more. Savings accounts have an interest based on which you can earn by saving. The interest isn’t high, but over time you can pile up a solid sum of money. Simultaneously, the more you put in your account, the higher the interest will be.
What Are Savings Accounts Advantages?
- Security
- Liquid funds
- Automated saving
- Emergency fund
- Low to no cost
What Are Savings Accounts Disadvantages?
- Low interest
- No tax savings
The Bottom Line
A savings account is a great way to keep some money on the side in case of emergencies. It also streamlines your saving efforts and makes it easier to pile up a decent amount of savings. Don’t count on earning a lot through interests unless you plan on keeping a lot of money in your account.