A savings account is a kind of bank account used to safely store and grow your money by earning interest on your deposits. Unlike a chequing account, which is typically used for day-to-day transactions like paying bills, savings accounts are meant as a short-term investment vehicle to help grow your savings conservatively with absolutely no risk. The cash you deposit in a savings account is “liquid”, which means your money is always accessible and can be withdrawn at any time. It’s why a savings account is an ideal place to set aside extra money for a vacation, upcoming big-ticket purchase (like a new TV), or an emergency fund.

You can open a savings account with any bank or financial institution, and your savings account doesn't have to be with the same bank you use for your other daily banking activities. Depending on the savings account, you may have an unlimited number of free account transactions (e.g. withdrawals and e-transfers) or there may be a limited number of free transactions included every month, after which you’ll have to pay a small extra fee per transaction.

There are a number of different types of savings accounts available to Canadians, each with a different intended purpose. A few different types of savings accounts are:

High interest savings accounts

High interest savings accounts are savings accounts that pay a high rate of interest compared to other savings accounts available on the market. In Canada, you’re required to pay income tax on the money you earn in a non-registered high-interest savings account.

Tax-free savings accounts

The name tax-free savings account (TFSA) actually refers to a tax shelter that can be used with a number of different investment products, but there are savings accounts available as a TFSA. TFSA savings accounts typically offer a lower interest rate than high interest savings accounts, but as the name suggests interest earned is tax-free. You can only open a TFSA if you're a Canadian citizen age 18 or over.

Youth savings accounts

Many banks and financial institutions offer special savings accounts just for children. Youth savings accounts sometimes offer special incentives and educational tools to teach kids how to save money and how to bank.

Seniors savings accounts

Less common than children’s accounts, seniors savings accounts can offer special interest rates or reduced fees for Canadians who are 65 and over.

Both high interest saving accounts (HISAs) and guaranteed investment certificates (GICs) can be used as investment vehicles and can help you save money and earn interest. The main differences between the two are liquidity and interest.

GICs are "locked-in" investments, meaning that when you make a deposit into a GIC, you have to leave it there for a certain amount of time (depending on the selected term) or pay a penalty. Typically, the interest rates of GICs are higher than those seen for HISAs, which are far more flexible allowing you to access your money at any time, but tend to offer lower interest.

The Bank of Canada's overnight rate dictates changes in the prime rate, which then influences the amount of interest earned on HISAs and investments such as GICs. 

With the upward movement in the Bank of Canada’s overnight target rate in 2022, deposit rates have slowly increased. Big banks are slower to pass these increasing interest rates on to consumers, but usually will start to increase their high interest savings rates when there is competitive pressure from credit unions or smaller institutions.