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Dubbed by bankers and those in the financial industry as a HISA, a high-interest savings account isn’t what it seems.
The running joke among those who talk about “growing money” is that a high-interest savings account really doesn’t pay that much interest when compared to investments, such as guaranteed investment certificates (GICs).
But that said, a high-interest savings account does have a place in most people’s finances.
HISAs are definitely favourable financial products for short-term or long-term parking of your money, especially if you’ve already contributed the maximum amounts you can this year to your tax-free savings account (TFSA) and/or registered retirement savings plan (RRSP). The good news is that there are no limits for what you can contribute to a HISA.
You can use a high-interest savings account for an emergency fund, stowing away just-in-case money equal to three to six months of your paycheque. Say, for example, you lose your job or your car breaks down. It’s important to note that interest earned within a HISA is taxable as income. But the big benefit of a HISA is that it’s a low-risk way of saving money, and you have access to your deposits anytime.
Example: “After buying a used car, Matthieu is using his high-interest savings account to set aside money for any unexpected repair costs.”
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