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Types of Savings

There are several types of savings options, and choosing the right one will depend on what you're saving for, or the specific savings goal that you want to achieve.

That’s why it can be a good idea to have a number of different savings accounts, with each one for a specific type of saving. For example, you could use one savings account to cover unexpected costs, one to save up for a holiday, one to build up a down payment for a home, and so on.

Savings accounts tend to differ in 3 main ways:

  • Interest 

    The rate of interest you'll earn on the funds you deposit

  • Term

    The length of time you're prepared to tie up your savings

  • Conditions

    Whether you must make regular small deposits, or larger amounts whenever you have a surplus

Here are some common types of accounts, and the sorts of savings goals they can be good for:

Account type Key features
Good for?
Instant access savings accounts (also called Savings Account or Demand Deposits) Fast or immediate access to your money, but the interest rates offered are often very low. Money you don’t need for day to day expenses, but that you might need at short notice for emergency or unexpected expenses.
Regular or basic savings account
Often come with rules about minimum monthly deposits, or maximum withdrawals, but may offer a slightly higher interest rate in return. Putting aside a proportion of your monthly income.
Fixed rate savings (also called GIC’s or term deposits) Better interest rates than a regular savings account. Your money is ‘locked in’ and inaccessible for a fixed period of time, from a few days to several years. They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts. Depositing funds that you know you aren’t going to need for a while; can also be suitable for meeting longer term savings goals.
Government backed savings (Tax-Free Savings Account – TFSA)

TFSA is a savings account that offers you the flexibility to invest and pay no tax on any investment earnings. Your savings will grow faster because income and capital gained accumulate tax-free.

Contribution room availability may increase for each year with no age limit, as long as you have unused room. Withdrawals can be made at any time for any reason. There are several investment options, like savings accounts, GICs, mutual funds or individual stocks.

TFSAs are a great way to save. Your money grows faster because income and capital gains are tax-free. Plus, they encourage you to start saving early to meet the demands of the future without having to worry about taxes on your earnings and withdrawals.
Investments

Comes with the risk that you might not get back what you invest. But if you’re able to set your money aside for 5 years or more, investing in mutual funds or shares has the potential to make your money work harder than it would in a savings account.

 

We explain the pros and cons of investing money in more detail here.

Setting aside money you're not going to need for years, such as your retirement savings.

Here are some common types of accounts, and the sorts of savings goals they can be good for:

Account type Instant access savings accounts (also called Savings Account or Demand Deposits) Instant access savings accounts (also called Savings Account or Demand Deposits)
Key features
Fast or immediate access to your money, but the interest rates offered are often very low. Fast or immediate access to your money, but the interest rates offered are often very low.
Good for?
Money you don’t need for day to day expenses, but that you might need at short notice for emergency or unexpected expenses. Money you don’t need for day to day expenses, but that you might need at short notice for emergency or unexpected expenses.
Account type Regular or basic savings account
Regular or basic savings account
Key features
Often come with rules about minimum monthly deposits, or maximum withdrawals, but may offer a slightly higher interest rate in return. Often come with rules about minimum monthly deposits, or maximum withdrawals, but may offer a slightly higher interest rate in return.
Good for?
Putting aside a proportion of your monthly income. Putting aside a proportion of your monthly income.
Account type Fixed rate savings (also called GIC’s or term deposits) Fixed rate savings (also called GIC’s or term deposits)
Key features
Better interest rates than a regular savings account. Your money is ‘locked in’ and inaccessible for a fixed period of time, from a few days to several years. They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts. Better interest rates than a regular savings account. Your money is ‘locked in’ and inaccessible for a fixed period of time, from a few days to several years. They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts.
Good for?
Depositing funds that you know you aren’t going to need for a while; can also be suitable for meeting longer term savings goals. Depositing funds that you know you aren’t going to need for a while; can also be suitable for meeting longer term savings goals.
Account type Government backed savings (Tax-Free Savings Account – TFSA) Government backed savings (Tax-Free Savings Account – TFSA)
Key features

TFSA is a savings account that offers you the flexibility to invest and pay no tax on any investment earnings. Your savings will grow faster because income and capital gained accumulate tax-free.

Contribution room availability may increase for each year with no age limit, as long as you have unused room. Withdrawals can be made at any time for any reason. There are several investment options, like savings accounts, GICs, mutual funds or individual stocks.

TFSA is a savings account that offers you the flexibility to invest and pay no tax on any investment earnings. Your savings will grow faster because income and capital gained accumulate tax-free.

Contribution room availability may increase for each year with no age limit, as long as you have unused room. Withdrawals can be made at any time for any reason. There are several investment options, like savings accounts, GICs, mutual funds or individual stocks.

Good for?
TFSAs are a great way to save. Your money grows faster because income and capital gains are tax-free. Plus, they encourage you to start saving early to meet the demands of the future without having to worry about taxes on your earnings and withdrawals. TFSAs are a great way to save. Your money grows faster because income and capital gains are tax-free. Plus, they encourage you to start saving early to meet the demands of the future without having to worry about taxes on your earnings and withdrawals.
Account type Investments
Investments
Key features

Comes with the risk that you might not get back what you invest. But if you’re able to set your money aside for 5 years or more, investing in mutual funds or shares has the potential to make your money work harder than it would in a savings account.

 

We explain the pros and cons of investing money in more detail here.

Comes with the risk that you might not get back what you invest. But if you’re able to set your money aside for 5 years or more, investing in mutual funds or shares has the potential to make your money work harder than it would in a savings account.

 

We explain the pros and cons of investing money in more detail here.

Good for?
Setting aside money you're not going to need for years, such as your retirement savings. Setting aside money you're not going to need for years, such as your retirement savings.

HSBC offers a variety of savings accounts that can help you meet your saving goals. Whether its saving weekly or monthly, you can easily set up regular auto-deposit contributions to build your savings and stay on track. Learn more.

Saving Strategies

Learn how the right approach to managing your savings can work with your lifestyle and needs.

hsbc-financial-wellness-savings-vs-investing.jpg Saving vs investing Find out more about the difference between saving and investing to help you decide what’s best for you.

Learn more about the advantages of saving early for your retirement, what a government pension looks like and how employer contributions can increase your pension amount.