Savings accounts

From: Financial Consumer Agency of Canada

How compound interest adds up over time as you make more deposits into your account.
Figure 1 - Text version
Months Interest Principal (Deposits)
1 $13.08 $1,200.00
2 $50.64 $2,400.00
3 $113.19 $3,600.00
4 $201.22 $4,800.00
5 $315.24 $6,000.00

The example uses rough figures. Actual results will depend on how the financial institution calculates interest.

For example, the formula may depend on the number of days in the month. This would result in slightly more interest being paid during the longest months.

Paying taxes on money in a savings account

You usually have to pay income tax on the interest earned in your savings account. Each year, your financial institution will send you a return of investment income slip (T5). You must submit it along with your personal income tax return. A T5 shows how much investment income you earned for a given tax year.

This includes income you earned from interest in bank accounts.

Find out how to read the information on your T5 slip.

If your goal is long-term savings, think about getting a Tax-Free Savings Account (TFSA). You don’t pay tax on the interest you make and the money you withdraw from a TFSA.

Learn how to open a TFSA.

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