Things you need to know about your savings account
Opening a savings account is an important step to take as you plan for your future goals; your money is safe in the account as it earns interest.
Let’s dive into what these types of savings accounts are and how they work.
How do savings accounts work?
Simply put, you will open your savings account at your bank and deposit your money into it. The balance then builds interest over time.
While you can withdraw money from your chequing account and it gains little to no interest, your savings account balance stays put, unless you add money to the account, or need to withdraw or transfer funds for an unforeseen or emergency situation.
Ideally, you will leave the money in your savings account so the interest can build over time and you have that money to rely on in the years to come.
What are the types of savings accounts?
There are a variety of different types of savings accounts to consider – you want to find one that works best for you in terms of where you are in your life, what your goals are and your overall financial plan.
Explore the type of savings account that works best for you.
Different types of savings accounts provide their own set of perks, from how the interest rate grows, based on how long you've been saving, your balance, how often you use your debit card, age-based fee waivers, and savings plans for USD. Here are some options to look into:
High-interest savings accounts
High-interest savings accounts are savings account that have a higher interest rate, helping you increase your savings over time. Your financial advisor can walk you through which type of high-interest savings accounts works best for you when you open your account, with suggestions for your savings so you can earn most effectively.
Youth saving accounts
Looking to get your child started on the right financial foot? There are savings accounts specifically created for young people, offering perks like unlimited debit transactions. At Scotiabank, you can open a saving account for your child, called the Getting there savings program for youth, which is designed for those age 18 and younger.
Student savings accounts
Starting post-secondary education is often when people start taking ownership over their own finances. There are often great rewards available for savings accounts created for Canadians hitting the books.
Foreign currency savings accounts
You might have savings you want to grow that aren’t in Canadian dollars. There are savings accounts options that are designed for people with international currency. Scotiabank offers both the Scotia U.S. Dollar Daily Interest Account and the Scotia Euro Daily Interest Savings account.
How much should you keep in savings?
Many experts suggest having an emergency fund to cover at least three to six months of total living expenses. Having a savings account that you think of as your emergency fund is a great resource to have as a building block of your financial plan.
How are savings accounts taxed?
The type of tax slip you can expect to get depends on the type of income that you have received in the year and whether you were a resident of Canada for tax purposes.
This can include a T5 Statement of Investment Income. A T5 slip is issued for investment income earned in excess of $50 by Canadian residents. Investment income includes income from the following sources:
- Interest income received and accrued interest earned from cash, GICs, bonds, compound bonds and other debt instruments
If you are a Quebec resident, you will also receive a Relevé 3 in addition to a T5 slip.
Who should get a savings account?
Really anyone can open a savings account when they have some money to get started. Even a small savings account is a smart idea, as it can grow over time and give you a cushion of protection as an emergency fund. Whatever your age, savings accounts are important for long-term plans and practices.
If you are not sure where to start or if you are ready, speak to a financial advisor who can walk your through the different account offerings and guide you accordingly with the best savings account for you and your goals.