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Summary: Saving is no easy task, which is why it’s crucial to make the most of every dollar you manage to set aside. In this guide we reveal our pick for the best interest rate savings account in Canada – Interactive Brokers (IBKR), whose offer outshines traditional savings accounts by a long shot.
Best Platform for Worldwide Stock Trading & Investing
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Highly trusted multi-asset broker with clients in over 200 countries
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Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
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Low commissions starting at $0 with no platform fees or account minimums
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Easily fund your account and trade assets in 26 currencies
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IBKR pays up to 4.58% interest on cash balances of $10k or more
How to choose a savings account?
When selecting a savings account, consider the following attributes:
- Interest Rate/APY: When choosing a savings account, the primary consideration is its interest rate or annual percentage yield (APY). The greater the interest rate, the quicker your savings can passively accumulate;
- Fees: Choose a savings account with minimal or no fees. This will allow a more significant portion of your savings to remain intact and keep earning interest;
- Minimum balance: Some savings accounts require a minimum deposit to open an account. Others might necessitate maintaining a specific balance to be eligible for the highest APY. For example, Interactive Brokers extends its top yield to customers with a minimum cash balance of $13,000 Canadian dollars. Should this minimum not be met, the yield decreases to a lower rate;
- Convenience: Both traditional and online banks provide online and mobile banking options, but some may be more user-friendly. If you value face-to-face support, a traditional bank might be a better fit, though you may find high-yield savings accounts more prevalent with online banking platforms;
- Deposit insurance: Ensure your deposits are insured by the appropriate regulatory bodies;
- Liquidity: Consider how easy it is to access your funds. It’s crucial to understand these restrictions, as you don’t want to be in a scenario where you can’t access your money when necessary. While high-yield savings accounts may proffer superior interest rates, they might also stipulate extended withdrawal notice periods, affecting liquidity. Ensure you balance your desire for a return with your liquidity needs.
Where to open a savings account?
While Interactive Brokers may primarily be known as a brokerage, they also offer attractive yields on your deposits.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
Indeed, Interactive Brokers clients can expect to earn up to CAD 4.191% on instantly available cash balances exceeding $13,000 Canadian dollars, with interest directly credited to the account so it’s available immediately.
Furthermore, with Interactive Brokers’ Cash Management service, clients can utilize these cash balances for various trading activities and transactions from a single account.
Interactive Brokers calculates the interest paid using the Bank of Canada’s benchmark interest rate, subtracting 0.5%. As interest rates increase, so do earnings for Interactive Brokers’ clients. The Cash Management service provided by Interactive Brokers offers investors a simple means to earn at superior rates and manage their finances without the need for multiple accounts and services.
On top of being able to earn CAD 4.191% on cash balances, IBKR’s Cash Management solution includes the following features:
- Borrow: Borrow funds at CAD 6.191 CAD or less, with no monthly minimum payments or late fees;
- Card use: With the IBKR Debit Mastercard®, clients can use their brokerage account assets to make purchases or withdraw cash from ATMs at millions of locations globally without late fees or foreign transaction charges;
- Invest: IBKR will enable you to invest globally in stocks, options, futures, forex, bonds, and ETFs, access more on 150 global markets from a single unified platform, fund your account in various currencies as well as trade assets denominated in multiple currencies;
- Low cost: Low commissions without added spreads, ticket charges, platform fees, or account minimums;
- Security: Interactive Brokers’ robust financial standing and conservative business management safeguard both the company and its clients.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
How to open a savings account? Step-by-Step
The process of opening a savings account varies slightly among different institutions. Here are the steps you would typically follow:
- Step 1: Choose the financial institution and account type – Decide where you plan to open your account, whether a traditional bank, a credit union, or a neobank. Reflect on the key factors discussed earlier, such as interest rates and fees;
- Step 2: Review the conditions – Different accounts have different conditions. Some might require a minimum deposit to register an account or maintain a certain balance to avoid charges. Ensure you understand these prerequisites before proceeding;
- Step 3: Gather your personal details – To open an account, you must provide some personal information. This typically includes your Social Insurance Number (SIN), date of birth, and contact data like your home address, email address, and phone number. You will likely also need a valid identification document, like a passport or driver’s license;
- Step 4: Register – Visit the bank’s website and find the “open an account” section. Alternatively, drop by the branch during operating hours if you’re establishing an account in person. Then, provide them with your personal details;
- Step 5: Make a deposit – After you’ve signed up, you can fund your account. This can typically be done with a transfer from another bank account, by sending a check via mail, depositing a check through your new bank’s mobile app, or by making a bank wire transfer. Apart from wire transfers, there are generally no fees or costs associated with moving funds to or from an online savings account;
- Step 6: Set up your account – Once your account is operational, set up online banking if available. This will allow you to monitor your balance and transaction history, transfer funds, make investments, settle bills, and more.
How are savings accounts taxed?
The interest earned in your savings account is subject to income tax.
You’ll be expected to report this income when you file your tax return. That figure can be found on your Statement of investment income (T5), which your financial institution sends you each year.
The tax rate applied to the interest generated from a savings account is the same as the one applied to your overall income.
Important
Do I need a savings account?
Everyone can profit from a savings account regardless of their financial standing. In fact, a high-yield savings account can significantly amplify your savings and help you reach your financial goals, be it buying a dishwasher, saving for a downpayment on your dream house, or bolstering your retirement funds.
Therefore, exploring various savings account options to find the highest interest rate (as opposed to settling for an account only because it’s offered by a familiar institution) is a task worth the effort.
However, remember that the interest rate isn’t the sole factor worth considering. Instead, on top of a solid APY, look for reputable institutions regulated by the relevant authorities and assess the fees or conditions linked to the account, along with any additional features or perks on offer. Ultimately, the best savings account for you will cater to your needs and help you make the most out of your savings.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about the best interest savings accounts in Canada
How much interest will I earn in a savings account?
The national average APY on savings accounts is between 1 and 2.5%. Interactive Brokers, on the other hand, offers 4.191% on cash balances exceeding Can$ 13,000.
Why do I need a savings account?
A savings account is a great place to keep your emergency fund, as it generates interest over time. It can also help you prepare for short-term financial goals, such as saving for a down payment or a vacation. For a longer-term goal like retirement savings, however, it is generally recommended to invest your money instead of parking it in a savings account.
Can I open a savings account online?
Yes, online banks, credit unions, or other financial institutions like Interactive Brokers allow you to open an account from the comfort of your home. Moreover, compared to traditional brick-and-mortar banks, these institutions generally offer much higher interest rates on savings accounts.
Do savings accounts have fees?
Some savings accounts carry monthly upkeep charges. Ideally, you’ll seek one with minimal or, preferably, no fees. For instance, Interactive Brokers does not charge account maintenance or inactivity fees.
Best Platform for Worldwide Stock Trading & Investing
-
Highly trusted multi-asset broker with clients in over 200 countries
-
Trade on 150 markets globally from a single platform (stocks, ETFs, futures, currencies, crypto & more)
-
Low commissions starting at $0 with no platform fees or account minimums
-
Easily fund your account and trade assets in 26 currencies
-
IBKR pays up to 4.58% interest on cash balances of $10k or more
