Compare the Best High-Interest Savings Accounts in Canada for 2020
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Planning for a vacation? Saving up for a new car? Maybe you're just looking to build a substantial emergency fund or keep more money of your hard-earned money in your pocket. Whatever your goals are, a high-interest savings account is a vital personal finance tool.
high-interest savings account
with a high-interest rate makes a world of difference over a lifetime of contributions. Using one can help you reach your goals faster and keep your money working harder for you.
Below, we'll explore some frequently asked questions concerning this exceptional savings tool.
What's the difference between a savings account and a high-interest savings account?
The difference between a savings account and a high-interest savings account is the amount of interest each account offers its customers.
Savings accounts typically provide interest below 1.05%, while high-interest savings accounts tend to exceed this rate.
How does a high-interest savings account work?
All savings accounts provide some form of interest. A high-interest savings account, as you might have guessed, offers higher interest on deposits than regular savings accounts, with interest issued daily, monthly, or annually, depending on the provider.
Since the purpose of a high-interest savings account is saving and not spending, the account comes with more limitations than the average account.
A high-interest savings account is not a registered account. That means interest earned in a high-interest savings account is taxable at the same rate as your employment earnings.
If you're looking to save money and avoid paying taxes, a Tax-Free Savings Account (
) or a Registered Retirement Savings Plan (
) might be a more suitable option for you, though each type of account comes with its own set of conditions.
How to choose the best high-interest savings account for you
There are factors to take into consideration selecting a high-interest savings account. Some aspects to consider include branch access, transaction limits, and account interest, among other features that play a significant role in choosing an account best suited for your saving goals.
Generally, you'll want to choose an account with an interest rate between 2% and 2.5%. A rate of over 2% will keep your money's value up with Canadian inflation.
Money sitting in an account with no interest or low interest will decrease the value of your deposits. An account with good interest can earn you maintains its value and earns more money.
Generally, when it comes to high-interest savings accounts, you'll want to choose one with an interest rate between 2% and 2.5%, as this will keep your money's value up with Canada's rising inflation. Money sitting in an account with no or low interest will cause your money to decrease in value, so placing your money in an account with good interest can earn you more money quicker and also maintain its value.