The Different Types of Saving Accounts and Their Benefits
Savings accounts are a great tool for saving money and earning interest. Learn about the types of accounts available in Canada.
Updated 
6 min. read
Saving money has obvious benefits. The more you put away, the more you’ll have on hand for rainy day expenses, a once-in-a-lifetime trip, or that home renovation project you’ve been meaning to start. What isn’t as obvious is how to find the right vehicle to help you save that money. For many, a savings account is an option that makes a lot of cents. (See what we did there?)
Why savings accounts matter: Benefits you can’t ignore
A savings account is a type of bank account designed to help you set aside money and grow your funds through interest. There are several advantages to opening one.
When you deposit money into the account, your principal (the money you put in) earns interest that builds up over time. The amount of interest you earn varies depending on the type of savings account you choose, with options like high-interest savings accounts (HISAs) designed to help you maximize your returns. Interest acts as a reward for saving and encourages you to keep your money in the account longer.
Plus, these accounts make saving even easier by letting you automate your deposits. Most financial institutions allow you to set up automatic transfers from your chequing account to your savings account, so you can consistently save a portion of your income without having to move funds manually. You can choose how much and how often funds are deposited, such as every payday. This “pay yourself first” approach helps you create consistent savings habits that can drive long-term stability and success.
What’s more, any money you keep in a savings account (up to $100,000 per depositor, per insured category) is protected by the Canada Deposit Insurance Corporation (CDIC). This makes savings accounts far safer than storing cash at home, or even in a safety deposit box. At the same time, you can usually access your funds whenever you need them without penalty, so you don’t need to decide between security and flexibility.
Types of savings accounts available in Canada
Banking customers in Canada have a lot of choices when it comes to picking a savings account. Here are a few options you might encounter while doing your research:
- Basic savings account
- High-interest savings account (HISA)
- Youth or student savings account
- Joint savings account
- Business savings account
- Online savings account
- Specialty savings account
- Designated investment accounts (FHSA and TFSA)
- Foreign currency savings account
Basic savings account
A basic savings account is the most straightforward savings option and often the first type people consider. You can deposit funds at any time and earn modest interest on your balance, making it a flexible, secure place to keep your money.
Most financial institutions also make these accounts easy to open and maintain, as they often have low or no monthly fees associated with them. They work well for short-term goals like saving for emergency home repairs or a much-needed vacation.
High-interest savings account (HISA)
Also known as a high-yield savings account, a high-interest savings account (HISA) is a type of account that offers a higher interest rate than basic savings accounts. They can be a great way to earn more on your savings, but the trade-off is that they may come with limitations on transactions and withdrawals. That said, HISAs are ideal for building savings for medium-term goals, such as a down payment on a house or a large expense. They strike a nice balance between lower-interest savings accounts and more complex investment-focused ones.
Want to make the most of your savings?
BMO’s Savings Amplifier Account helps you grow your money faster than basic savings accounts.
Youth or student savings account
It’s never too early to start saving! Youth and student savings accounts can help young people set aside money from allowances, part-time jobs, or gifts while building financial literacy and good habits that can last a lifetime.
Parents or guardians typically open these accounts to encourage saving and foster financial independence. Many institutions waive fees and may include parental controls, making these accounts a safe way for youth to manage growing balances and prepare for adult financial products down the road.
Joint savings account
A joint savings account is an account that allows two or more people to pool their money into a single account. Each account holder can deposit or withdraw funds, and everyone benefits from the interest earned. Joint accounts are a great option for couples saving for a major purchase like a home or car, and for families managing a household budget.
They make tracking savings easier but also require trust, since everyone named on the account has equal access. For that reason, they are generally best suited for long-term partners or family members working toward a shared goal.
Business savings account
Business savings accounts help business owners earn interest on surplus cash while keeping funds available if you ever need to access them. These accounts are often linked to business chequing accounts to make transfers easy.
While interest rates vary, their main advantage is keeping business reserves separate from day-to-day operating cash. They also provide a clear division between business and personal finances, which is essential for proper bookkeeping.
Online savings account
An online savings account works much like a basic savings account but is managed entirely online. Because digital banks save on overhead, they may offer higher interest rates. However, this account type is much less convenient than others, as it typically isn’t linked to a debit card and can tie up your cash flow.
Specialty savings accounts
Many banks offer special savings accounts for specific groups or industries. They usually carry unique terms and eligibility rules, and they provide added incentives or cost savings to those who qualify that you wouldn’t find with a basic savings account. A good example is BMO’s AgriInvest savings account. This no-annual-fee account is specifically designed to help farmers take advantage of the government’s AgriInvest program. Other common specialty savings accounts include those for newcomers to Canada, seniors, and charities.
Long-term savings goals with investment accounts (FHSA and TFSA)
Often considered savings accounts, the first home savings account (FHSA) and tax-free savings account (TFSA) are tax-advantaged investment products designed for long-term savings goals. The FHSA is specifically designed to help first-time home buyers save up for a home, and withdrawals used for that purpose are tax-free. If you withdraw funds for other reasons, they become taxable.
In contrast, a TFSA allows tax-free withdrawals at any time and for any purpose, but certain rules apply, such as limitations around recontributions. In a nutshell, both accounts offer tax-free withdrawals but have rules and annual contribution limits you’ll want to be mindful of.
Foreign currency savings accounts
A foreign currency savings account account lets you save, manage, and earn interest on funds in non-Canadian currencies, such as U.S. dollars. They’re beneficial for frequent travellers, cross-border shoppers, and those who have excess foreign cash, as they help you avoid conversion fees and often offer competitive exchange rates on transfers.
Choosing the right savings account for your needs
With so many options to pick from, narrowing down the right type of savings account can be tricky. Take a look at this table to help you make the right choice for you.
| Savings account type | Pros | Cons | CDIC-Insured? | Best for |
|---|---|---|---|---|
| Basic |
|
| ✓ |
|
| High-interest (HISA) |
|
| ✓ |
|
| Youth / Student |
|
| ✓ |
|
| Joint |
|
| ✓ If eligible |
|
| Business |
|
| ✓ Depending on business structure |
|
| Online |
|
| ✓ |
|
| Speciality |
|
| ✓ If eligible |
|
| Investment (TFSA / FHSA) |
|
| ✓ Except non-deposit investments |
|
| Foreign currency |
|
| ✓ Coverage calculated in CAD |
|
Savings account features to consider before opening an account
When it comes to savings accounts, all major financial institutions have their own distinct requirements and benefits, but there are a few common factors you’ll want to keep in mind. Let’s take a look.
Minimum account balance requirements
Not all savings accounts have minimum balance requirements, but some do. This is often the case for account types with higher interest rates, or during special promotions. So, if you’re unable to maintain that minimum account balance, you might want to consider alternatives. Otherwise, you risk facing penalties that can quickly add up.
Interest rates
Interest rates on savings accounts can range anywhere from 0.010% to 4% and above. In some cases, special promotional rates can make opening a savings account even more lucrative. It’s important to compare interest rates across all your options, as they can make a sizable difference in how quickly your savings grow and the rate at which they compound.
Transaction fees
Since savings accounts are designed for savings rather than cash flow, some accounts may come with fees for daily transactions. Many people open chequing accounts alongside savings accounts to use for everyday tasks like paying bills, making purchases, and transferring money.
Monthly account fees
Some savings accounts might also charge a monthly fee to keep them open. Before opening an account, you’ll want to ask your bank’s customer care team to explain all fees associated with the ones you’re considering.
External factors to consider when opening a savings account
In addition to comparing saving account options and their features, you should keep in mind other factors, such as your current banking set-up and provider—as well as your own personal goals. Here are a few more things you’ll want to consider:
Your savings goals: What are you saving for? Building up a deposit for your first home? Saving for unplanned emergencies? Depending on your short- and long-term goals, your financial institution may have various account options to suit your needs. If you’re a BMO customer, the BMO Savings Goals feature on the BMO Mobile Banking app can help you set up, track, and reach your goals—all from your smartphone.
Customer support: You’ll also want to consider the level of customer support you can expect from your financial institution. Some offer 24/7 phone and chat support, while others may rely on branch visits during operating hours.
Who you’re banking with: You work hard for your money, so before making a deposit, you want to know that the financial institution you’re with is reputable, financially stable, and secure.
Whether or not to consolidate your accounts: If you’ve already got a chequing account with one bank, but BMO has a savings account that suits your needs, consolidating your accounts with one financial institution can make it easier to track your finances. It could mean less paperwork, fewer fees, and a clearer view of your cash flow. That said, you might choose not to consolidate if you prefer to keep rewards offered by different institutions.
Ready to start saving? Open an account today
Whether you’ve got your eye on a short or long-term savings goal, opening a savings account is the first step to making your goals attainable.
With so many options, rates, and account types to choose from, there’s a lot to consider—but there’s also a lot to gain. A savings account might be a bit less convenient than keeping money in your piggy bank, but it’s more secure and pays valuable interest. Happy savings!
Types of savings accounts FAQs
The best type of savings account for you depends on your financial needs and goals. Each of the different account types serves a unique purpose and has its own list of pros and cons. Make sure to evaluate your financial situation and do your research before making your decision.
Yes. You can open as many savings accounts as you like. You might choose to have multiple for several reasons. Maybe you want to budget better and reduce overspending by separating funds into an emergency-only account. Or, you might want to keep separate savings accounts to work toward specific goals with each, like saving up for a vacation, car, or major life event.
Different financial institutions offer a wide variety of accounts with varying interest rates. That said, some accounts, like BMO’s Savings Amplifier Account offer promotional rates that are typically higher.
A HISA is a type of account that offers higher interest rates than basic savings accounts. This can make them helpful when saving for a major purchase like a home renovation or winter getaway. Learn more about how these accounts work.
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