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Here’s how your money grows with interest, including the power of compound interest. Plus, how to choose the right account.
Do you know how interest rates work when it comes to your bank account? If not, you’re not alone. Nearly four in 10 Canadians surveyed don’t fully understand it, according to research by Angus Reid on behalf of PC Financial.
When you hold money in a savings account, interest is money you receive for lending those funds to the financial institution. The interest is calculated daily and paid out monthly. The interest rate, usually shown as a percentage, is how much interest you get per year. A higher interest rate means your money grows faster.
Here’s an example. If you have $10,000 in a savings account with a 3.1% annual interest rate, over the course of one year, you’ll earn $314 in interest. That’s a pretty sweet return, and with no effort on your end. The longer the money is in your account, the more interest it earns. That’s why it’s so powerful to start saving early.
Financial institutions such as banks and fintechs set account interest rates using the Bank of Canada’s policy interest rate as a guide. That’s why their rates can change over time: when the central bank raises or lowers its policy rate, financial institutions adjust their rates shortly after.
You’ll notice, though, that account providers offer different interest rates, some more competitive than others. Also, many banks have rules and restrictions on who can qualify for their best interest rate. Some advertise an attractive “up to X%” interest rate on savings accounts, but the fine print often includes conditions, such as a minimum required balance to get the best rate. Plus, some accounts charge monthly fees, which could eat into the interest you earn.
That’s why it’s important to shop around and compare different accounts, including their fees and features.
Have you ever seen a high interest rate advertised “for a limited time”? These teaser rates are exciting, but they only last for a few months, and then the interest drops sharply. Plus, you may have to jump through a few hoops—such as moving bill payments and direct deposits—just to unlock a higher rate.
Customers are getting wise to these blink-and-you-miss-’em rates, though. According to the PC Financial survey, 70% of Canadians feel frustrated when promo rates disappear, and over half say they don’t trust banks to offer fair, transparent savings products.
That’s why it’s smart to read the fine print and look beyond the flashy rates and focus on the account’s everyday interest rate, along with reviewing the fees and conditions.
Opening an account with a great interest rate and no monthly fees is the first step. Smart savers know it’s possible to grow their money even more. That’s where compound interest comes in. Compound interest is when you start earning interest not just on your original deposit, but also on the interest you’ve earned. It’s like a snowball getting bigger and faster as it rolls. The longer you save, the more powerful compound growth becomes—especially if you regularly add to your savings. Here’s how a $10,000 account balance could grow if the account holder deposits an additional $100 per month and the interest is compounded monthly.
| Interest rate | Original balance | Years of growth | Interest earned with no additional deposits | Interest earned with additional deposits of $100/month |
|---|---|---|---|---|
| 3.1% | $10,000 | 1 | $314.44 | $331.64 |
| 3.1% | $10,000 | 2 | $638.77 | $711.44 |
| 3.1% | $10,000 | 3 | $973.30 | $1,140.92 |
| 3.1% | $10,000 | 4 | $1,318.35 | $1,621.63 |
| 3.1% | $10,000 | 5 | $1,674.25 | $2,155.20 |
As you can see, combining compound interest with regular deposits accelerates savings growth—helping you reach your financial goals faster.
So where can you find an account with no catches? The PC Money Account from PC Financial is an all-in-one account with features designed for saving.
The PC Money Account is where you can get that competitive 3.1% everyday interest rate on your savings balance. That’s the current regular rate, not a short-term promo rate.
The account is just straightforward savings without surprises: no monthly fee to eat away at your balance; no minimum balance required to get the highest rate; and no time commitment, so you get the best rate while still having access to your money whenever you need.
It’s also the only bank account in Canada that rewards your spending with PC Optimum points. On top of the 100,000 bonus PC Optimum points you’ll receive for signing up, you’ll rack up points when you make everyday purchases with your PC Money Account, no matter where you shop. That means your oat-milk latte, new pickleball paddle, or grocery run can all turn into rewards. You can redeem your PC Optimum points towards groceries and essentials at Loblaw banner stores like Real Canadian Superstore, No Frills, and Shoppers Drug Mart.
Whether you’re saving for a beach vacation, a home renovation or a special event like a wedding, the PC Money Account can help you reach your goal faster. Just transfer funds from your spending balance to your savings feature, and your money starts growing—earning interest with no strings attached from day one. It’s a flexible way to earn $700-plus per year in value, once you add up the interest and rewards. Thanks to these and other benefits, the PC Money Account is currently MoneySense’s pick for best rewards bank account.
Get more details about the PC Money Account. (Conditions apply; value shown is for illustrative purposes. Conditions apply to all benefits.)
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.
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