5 min read

savings and current accounts

Written By

Clay Shiffman

Think about this: you've just landed your first job and are eager to start managing your hard-earned money responsibly. As you walk into the bank to set up your accounts, you're faced with a choice between a savings account and a current account. Unsure of which one suits your needs best, you hesitate, contemplating the differences between the two. Should you opt for a savings account, designed to help you grow your money over time while earning interest?

Or perhaps a current account, offering easy access to your funds for day-to-day transactions? It's a common dilemma faced by many, but fear not! In this guide, we'll go into the distinctions between chequing and savings account, helping you to make the right choice for your financial journey.

Understanding Savings Accounts and Current Accounts

When opening a bank account in Canada, it's important to consider your financial goals and desired features. Here are some common types of savings accounts in Canada:

  • High-interest savings accounts (HISAs): These accounts offer higher interest rates compared to regular savings accounts, making them suitable for long-term savings goals.

  • Tax-Free Savings Accounts (TFSAs): TFSAs allow you to contribute and grow your savings tax-free, offering additional flexibility for various financial goals.

  • Specialty savings accounts: These accounts cater to specific needs, such as student savings accounts or seniors' savings accounts, often with unique features and benefits.

Current accounts, also known as checking accounts or chequing accounts, are essential financial tools that provide convenient access to your money for day-to-day transactions. Unlike savings accounts, which typically offer interest on deposited funds, current accounts usually do not provide significant chequing account interest rate on the balance kept in the account. Instead, they focus on providing easy accessibility and flexibility for managing your finances.

Key Differences Between Savings Accounts & Current Accounts

Among the fundamental accounts offered by banks, savings accounts and current accounts stand out as pillars of personal finance. Understanding the distinctions between a chequing account vs savings account is essential for optimizing your financial strategy and aligning your banking choices with your specific needs and goals.

Purpose and Use

Savings Accounts:

Savings accounts serve as a financial safety net and a means of growing your money over time. They're ideal for those who prioritize saving and earning a little extra through interest. Here's how you can leverage a savings account effectively:

  • Building emergency funds: Life's unexpected emergencies can hit hard, but having a dedicated savings account allows you to set aside funds specifically for such situations, providing financial security when you need it most.

  • Saving for future goals: Whether it's buying a house, funding your child's education, or planning for retirement, a savings account offers a reliable way to steadily accumulate funds towards achieving your long-term aspirations.

  • Receiving salary deposits: Some employers opt to deposit your paycheck directly into your savings account, kickstarting your savings journey and encouraging responsible financial habits.

Current Accounts:

Current accounts are the workhorses of daily financial transactions, designed for those who frequently move money in and out of their accounts. They provide convenient access to funds for various transactions, making them indispensable for individuals and businesses alike. Here's how you can make the most of a current account:

  • Making frequent payments and receiving payments: From paying bills to receiving payments from clients or employers, a current account facilitates swift and hassle-free transactions, ensuring your money moves seamlessly.

  • Businesses and individuals with high transaction volume: If you find yourself dealing with a high volume of transactions regularly, a current account offers the flexibility and convenience to manage these transactions efficiently, keeping your financial affairs in order.

Transaction Limits

Savings Accounts:

Savings accounts typically come with restrictions on the number of withdrawals or transfers you can make each month. These limitations are put in place to encourage saving and discourage frequent dipping into your savings. While the exact number of allowed transactions may vary depending on the bank and type of savings account, it's common for there to be a cap to ensure that funds remain untouched for longer-term goals.

Current Accounts:

In contrast, current accounts have no such restrictions on the number of transactions you can conduct. They offer unlimited access to your funds, allowing you to make as many withdrawals, transfers, or payments as needed to manage your day-to-day financial activities efficiently. This unrestricted access makes current accounts the go-to choice for individuals and businesses with frequent transactional needs, providing the flexibility to move money as required without any hassle.


Savings Accounts:

Savings accounts are renowned for their ability to earn interest on the money you deposit. While the interest rates may vary depending on the bank and prevailing market conditions, savings accounts generally offer a modest return on your deposited funds. However, it's essential to note that the interest rates on savings accounts tend to be lower compared to other investment options. Nevertheless, even with these lower rates, the interest earned can still contribute to the growth of your savings over time.

Current Accounts:

Current accounts typically do not earn interest on the funds held within them. This is because current accounts are designed primarily for active use, with the funds intended to be readily accessible for everyday transactions. While current accounts provide unparalleled convenience and flexibility for managing your finances, they do not offer the potential for earning interest on your balance.

Minimum Balance Requirements

Savings Accounts:

When it comes to savings accounts, many banks offer the flexibility of low or even no minimum balance requirements. This means you can open and maintain a savings account with little to no pressure to keep a specific amount of money in it at all times. This accessibility makes savings accounts accessible to a wide range of individuals, including those who may be just starting to save or who prefer to keep their funds liquid for emergencies or other purposes.

Current Accounts:

Current accounts typically come with higher minimum balance requirements to maintain the account. Banks often impose these requirements to cover the costs associated with providing the various services and features offered with current accounts, such as unlimited transactions, check-writing capabilities, and overdraft protection. Failing to meet the minimum balance requirement may result in monthly maintenance fees or other penalties, making it essential to carefully consider whether a checking account aligns with your financial situation and needs.

Overdraft Facilities

Savings Accounts:

Savings accounts typically do not allow for overdrafts, meaning you cannot withdraw more funds than are available in the account. This limitation helps to safeguard your savings and prevents you from accidentally spending beyond your means. While this may offer peace of mind knowing that you won't incur overdraft fees, it's essential to monitor your account balance to avoid potential declined transactions due to insufficient funds.

Current Accounts:

On the other hand, current accounts often come with overdraft facilities, providing account holders with temporary access to additional funds beyond their available balance. This feature can be beneficial in situations where you need to cover unexpected expenses or emergencies. However, it's important to note that overdraft facilities typically come with fees and interest charges, so it's essential to use them judiciously and repay any overdraft amounts as soon as possible to minimize costs.

Factors to Consider When Choosing Between Savings and Current Accounts

Financial Goals

When selecting between a savings and a current account, consider your financial objectives. If your primary aim is to save money for the future and earn interest on your deposits, a high-interest savings account may be the ideal choice. On the other hand, if you require a versatile account for managing everyday transactions and expenses, a current account might better suit your needs.

Overdraft Protection Coverage

Assess whether overdraft protection coverage is essential for your banking requirements. Current accounts often offer this feature, allowing you to access additional funds temporarily if you overdraw your account. This can be beneficial for avoiding declined transactions or unexpected fees. However, if you prefer to manage your finances without relying on overdraft facilities, a savings account may be a more suitable option.

Transactional Needs

Consider your transactional needs and preferences when choosing between account types. If you frequently conduct transactions such as bill payments, transfers, or purchases, a current account with features like a virtual credit card may offer added convenience and flexibility. Conversely, if you prefer to keep transactions minimal and focus on saving and earning interest, a savings account may be a better fit.

Fees and Charges

Evaluate the fees and charges associated with each account type. While traditional savings accounts may have minimal or no fees, current accounts often come with various charges, including monthly maintenance fees, overdraft fees, and transaction fees. Take into account these costs and compare them against the benefits and features offered by each account to determine the most cost-effective option for your financial situation.

Wrapping Up

When it comes to managing your finances, understanding the differences between current vs savings accounts is paramount.

By carefully considering your needs and financial goals, you can determine which type of bank account aligns best with your lifestyle. Whether you're looking to deposit your paycheck, withdraw money for daily expenses, or grow your savings over time, both chequing and savings accounts are vital in your financial toolkit.

So, whether you opt for the flexibility of a chequing account or the long-term benefits of a savings account, remember to leverage online banking tools to manage your money efficiently. By making informed decisions about how you manage and utilize your bank accounts, you'll be better equipped to navigate the financial landscape and achieve your financial aspirations.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!