"What’s the point of a savings account in Canada?" one Canadian wants to know. Redditors weigh in

When Reddit user u/pq11333 posted a blunt observation to the r/PersonalFinanceCanada forum, they struck a nerve.

“Someone asked me today what the point of a savings account is in Canada and I couldn't answer them,” they wrote. “Because there is no point. There is virtually zero incentive to open one and shove money in there. A $100K will grant you roughly $12 per month. An absolute joke. Debt rules or shove it into the stock market gogogogo.”

This statement is both a rant and a reflection of a broader disillusionment many Canadians feel with traditional savings. As the interest rates for most big bank accounts barely keeps apace with inflation, alongside the constant pressure to “make your money work,” it’s easy to see why some feel the savings account has lost its purpose.

But while a standard savings account won’t build wealth on its own, personal finance experts, and many Redditors, argue it still plays a crucial role. It’s just not the one most people expect.

Liquidity first, not growth

“The point of a savings account is exactly as you stated. Liquidity and accessibility are paramount. That’s it. No more no less,” wrote user u/Thisisthewaymaybe in response to the post. It’s a sentiment that echoed throughout the ensuing discussion.

Redditor u/Hungry-Room7057 put it more plainly: “A place to store small amounts of money that you know needs to be liquid, but that you want to keep separate from your monthly chequing account.”

Others, like u/Grrym, use a savings account for what’s known as “sinking funds” — money saved for short-term goals like a vacation or home repair. “It helps me identify when I have extra money to transfer out and visualize when I’ve met a short term goal,” they wrote.

It’s not about building wealth. It’s about giving your money a clear purpose and somewhere safe to live.

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Emergency funds, not investing accounts

The clearest case for a savings account is when you need quick access to cash — not days or weeks later. Redditor u/Its_noon_somewhere shared a cautionary tale about accessing funds from a TFSA held in investments: “I’m still waiting for a $20K transfer… it was a one-week process to make the trades, and now it has been several days since they transferred it to my chequing account.”

Emergencies aren't too keen on waiting for market hours or banking delays.

For users like u/awe2D2, a savings account acts as a buffer: “Checking account I keep at my usual monthly bills. Savings account is my emergency fund, roughly 5-6 months of usual bills.” They tap the account when a surprise car repair or emergency expense pops up, covering the difference between a credit card bill and the balance in their chequing.

That sense of quick access and security is what matters, added u/ImNotHandyImHandsome: “Everyone’s situation is different. Some people value the accessibility and abhor volatility of the markets.”

Bridget Casey, Canadian financial educator and founder of Money After Graduation, agrees. In an interview with Global News, she explained why keeping short-term savings in cash still makes sense:

“I’m a big advocate of having cash on hand. Your emergency fund and anything you’re saving for — short-term goals with a time horizon of two years or less — should stay in cash… The point of having cash savings is to protect yourself in emergencies and to save for a short-term goal without exposing yourself to that risk and volatility.”

Don't like the rate? Try a different bank

Critics of savings accounts usually point fingers at the low interest rates from the Big Six banks, where promotional rates vanish after three months and accounts drift back to near-zero returns.

“Big banks like CIBC, TD, RBC, etc. would never give rates like that,” wrote u/Best-Swimmer3752. “They only offer 3-month promos with high interest then go back to giving their usual 0.0000000000000000001%.”

Instead, smaller and digital-first banks have stepped in. EQ Bank, for instance, offers a 2.75% high interest savings account (HISA) when you direct deposit your pay. Wealthsimple’s hybrid chequing account offers 1.75% with CDIC protection. These accounts provide a middle ground, not as high-risk as the stock market, but not as stagnant as traditional savings accounts either.

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Not for everyone — but still for many

Could some of this cash be working harder in a TFSA or RRSP? Absolutely — if it’s money you won’t need soon. Some, like u/Kaervek84, even advocate for using a cash ETF for emergency funds, backed by a line of credit to handle short-term liquidity.

But that assumes a level of market savvy, discipline and access to credit that not everyone has.

u/Asypeasycheesywheeze offered up a more pragmatic view shared by many: “The newer banks that pay a decent interest rate can be used to store savings that aren’t meant for long-term investing. Money you will need in less than a year.”

In the end, a savings account is not about growing rich. It’s about being ready.

Or, as u/PenguinFlow quipped in response to the original post: “If you read the OG post they say ‘shove it into the stock market,’ which is a bit silly lmao.”

The old-school savings account might not win any popularity contests in today’s financial landscape. But for Canadians who value liquidity, separation of funds and peace of mind, it still makes a lot of sense.

Sources

1. Reddit: r/PersonalFinanceCanada - Someome asked me today what the point of a savings account is in canada and I couldn't answer them

2. Global News: How to protect your savings from inflation (November 6, 2021)