Top three risks of savings accounts
1. Low return
Your money will earn interest in a savings account, but not much. It will earn more in a high-interest rate savings account, but not as much as in some other, low-risk investments.
2. High costs
You may be charged high fees for various activities with your savings account. Know the fees you are paying, and make sure you have the package of services that is right for you.
3. High taxes on interest
The interest you earn will be taxed like your regular work income. The income you earn from some other kinds of investments can be taxed at a lower rate.
Is my money safe if my financial institution goes out of business?
Yes, because all major Canadian banks are members of the Canada Deposit Insurance Corporation. Similar insurance is available for deposits at credit unions and caisses populaires.
If you open a savings account with one of these institutions, your money is insured up to a certain limit. The money must be in Canadian funds. US dollar accounts are not covered.
Remember: A savings account may not lose money, but you won't make much, either
How much money you put into a savings account depends a lot on how quickly and easily you might need to get to it. Other options that might pay higher interest may not provide you with quick and easy access.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.