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How to Open Different Types of Savings Accounts

Nov. 11, 2011
3 mins
A person drops a coin into a piggy bank while sitting at a table with a coffee

First Steps – How to Open Different Savings Accounts

Good for you! You’ve made the smart decision to open a new savings account. You have a budget and a plan. All you need to do is open the account, which is, no doubt, the easiest part of the journey. Once you make that first deposit, the exciting part is watching your money grow.

Most banks require 2 pieces of identification in order to open an account. One of those pieces must be photo ID.

  • Passport
  • Social Insurance Number
  • IMM 1442 (Student Authorization, Employment Authorization, Visitor Record, Temporary Resident’s Permit)
  • IMM 5292 (Confirmation of Permanent Residence)
  • Health Card
  • Birth Certificate
  • Drivers License

TFSAs

Since they need to be registered, tax-free savings accounts must be opened in person. Why do they need to be registered? Because the money you make in interest is tax-free and the government wants to keep track of that. Currently, there’s a limit to how much money you can deposit each calendar year - $5000.

In order to get started all you need to do is fill out some forms and provide identification. You can ask your bank to make regular, fixed deposits, or you can retain complete control and deposit whatever you like, whenever you like.

RRSPs

Thinking about RRSPs? Good idea. Not only is it wise to save for the future, the money you invest also provides you with tax savings.  Similar to a tax-free savings account, an RRSP, or registered retirement saving plan, is a registered program through the government. What you invest now helps to offset your taxable income, but you will be taxed later when you withdraw the money.  The idea is that you are likely in a higher income tax bracket now than you will be later in life when you withdrawal from your RRSP (in retirement), therefore your income is ultimately taxed at a lower rate.

A financial institution can help you choose a plan that works well for you. You have many options to choose between, such as a balanced fund or a more aggressive plan. Visit your financial institution for more information and always work with a financial representative that you trust.

GICs

One of the easiest and safest ways to save your money, both long term and short term, is through GICs, or guaranteed investment certificates. Often GICs offer higher interest rates than traditional savings accounts and, since your interest and principal are guaranteed, they are secure investments.

GICs can be saved for any set amount of time, 30 days and over, at a set interest rate. You can choose one of two options; non-redeemable GICs or GICs that are redeemable at any time. If you choose non-redeemable, you cannot access your money until the term reaches its end. With redeemable GICs you can access your money at any time, but the interest rates are often lower than if you held the GIC to term.

HISAs

A high interest savings account, or HISA, is another great savings option. With this type of account you can earn higher interest than you can with traditional accounts. You may be required, however, to limit your transactions and to keep a minimum balance.

One thing’s for certain, it’s tougher to save if you don’t have an account. Do yourself a favour and visit your bank soon. Talk about your options. At the very least, set up an account so you can set money aside at your convenience.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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