I also didn't know there's encryption option within Google's password manager.
While it might help you protect your password again hacker, but i doubt your password is safe against Google itself.
I'm also thinking the same way. I never saved my passwords on google at all. It is because google have many problems that's why I don't save my passwords in google. Just like their playstore letting those scammers to add their scam apps in there play store which is not good crypto enthusiast. Even though it's encrypted, I still don't want to save my password.
You can use KeyPass (
https://keepass.info/), a local application to store all your passwords if you do not trust the online password manager like this google password manager.
My personal tip, use a brand new email for every new website you need to create an account with, if they require an email address. You can easily make one even using gmail and any old android phone.
We cannot use separate email for every website we register. First it will be hassle to create hundreds of emails as every email require you to verify it with the phone number and managing them is not an easy task. I personally have 3 email ids and they are enough for me.