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For many, goals will be appraised or restarted, and that might include saving money. Will 2024 be the year you finally start practicing discipline with your savings goals? Will you sacrifice the luxuries of a daily latte for more bucks in your bank account down the road?
If the answer is yes, then we are here to help with some potential destinations for your cash. High-interest savings accounts (HISA) are a popular vehicle for those looking to squirrel away a few nuts each month.
Don’t, however, just throw your money at the first bank to come calling. It's key to shop around for the best interest rate, so you're getting the maximum return on your dollars. We've researched the top 5 high-interest savings accounts that will help you build for the future.
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Why a high-interest savings account is important
High-interest savings accounts are good for short-term savings goals (1-5 years). An example of a short-term savings goal would be a down payment on a house or car, vacation, wedding, or a home-improvement project. With the rate of inflation in Canada rising by as much as 3.4% in recent years, it's important to keep your money where the interest rate can offset it. That means getting excess cash out of your checking account and regular savings accounts and into a HISA that offers good rates, low fees, and other perks.
Remember: When you move your money into a high-interest savings account, you usually have to forgo the convenience of making frequent withdrawals. If you do need to access funds, it will come at a cost, so make sure that the money you deposit is money you probably won't need anytime soon.
What are the best high-interest savings accounts for new savers?
- EQ Bank 2.5% interest rate – This online-only bank made a huge splash when it debuted several years ago with a market-leading 3% interest rate. It has since come down slightly yet it continues to lead with a permanent rate above the rest. EQ is the champ for a user-friendly website and zero fees for storing your cash. It recently began offering TFSAs and other investment vehicles. As long as you don’t need that personal, branch outlet experience, EQ can’t be beaten.
- Tangerine 1% – A subsidiary of Scotiabank, Tangerine is another online entity that offers attractive rates with little to no user fees. This will work for those accustomed to online and mobile banking and does not require the branch outlet experience.
- Canadian Tire Bank 3% – If you don’t mind the indignity of saying “I bank at Canadian Tire,” then you are in line for one of the best savings rates on the market. This is also an online-only banking service that boasts no monthly fees and no minimum balance required. They also offer 24/7 customer support and deposit protection (CDIC) for any sum under $100,000.
- Bridgewater Bank 3.45% – Although not a well-known financial institution like the Big 5, this Alberta chartered bank boasts a $2.6 billion portfolio representing over 35,000 accounts in Canada. It is owned by the AMA, and at 3.25% it offers one of the best interest rates available through its Smart eSavings online product, though more than one withdrawal a month will cost you. That said, you should be taking a hand-offs approach to your savings account anyhow.
- CIBC 1.8%* – While most of the traditional big banks in Canada offer around 0.05% for their high-interest savings, CIBC is offering a generous 3.65% promotional rate . The benefits here are the customer service features like branches, in-person financial advice, multiple products and more. Those are tangibles the online banks and alternative lenders can’t always offer.
What about long-term savings goals?
If you’re looking for a way to let your money grow, a high-interest savings account isn’t the only option. You can invest in a multitude of ways, including RRSPs, GICs, TFSAs, and more. However, keep in mind that most registered investment vehicles, most notably the popular RRSP, are structured to keep your money locked in for a long period of time. If you need access to it, you will pay a steep taxation penalty for early withdraws. The trade-off is usually a much higher return than compound interest from a savings account.
TFSAs, which stands for Tax-Free Savings Accounts, are worth considering because you can earn interest, enjoy constant access to your money, and not pay tax on the interest you earn each year, which is the case for the high-interest savings accounts we mentioned earlier. The main catch: TFSAs have yearly contribution limits.
Think about tomorrow’s finances today
The upcoming year will be your chance to finally begin that much-delayed savings plan. Talk to one of our representatives to get practical advice on a financial strategy that could include securing a personal loan to clear debts and help you take steps to a better financial future. Apply today and see how we can help!
