What is an investment savings account?

ISAs have no maturity dates or locked-in periods, so money can be easily added or withdrawn. However, you can’t pay bills or do other transactions through an ISA—they are designed exclusively for holding cash. 

While the rate on an ISA is typically higher than rates on traditional savings accounts, it is not guaranteed and can change at any time. 

ISAs come with minimum and maximum deposit amounts and can be held in most registered and non-registered accounts. Some financial institutions offer both Canadian-dollar and U.S.-dollar ISAs. 

Although ISAs are deposits, not mutual funds, they are bought and sold like mutual funds. Trades are settled one business day after your transaction, referred to as T+1.

ISAs vs. HISAs

ISAs are similar to high-interest savings accounts (HISAs) in many ways:

• Both offer a safe place to store cash and earn a competitive interest rate.
• Interest on ISAs and HISAs is calculated daily and paid out monthly.
• Both ISAs and HISAs can only be owned by Canadian residents.
• Both are insured by the Canada Deposit Insurance Corporation (CDIC) up to certain limits. 

Key differences between ISAs and HISAs include:

• ISAs are usually held in advisor-managed investment accounts as part of your overall portfolio, while HISAs are standalone savings accounts purchased directly from banks, credit unions and other financial institutions.
• Because ISAs are trust accounts, their CDIC insurance coverage is separate from coverage of assets held in your name.
• HISAs permit a wide range of transactions, often charging fees, while ISAs are used exclusively for holding cash, typically without transaction fees. 
• Like mutual funds, some ISAs are offered in different series, aimed at different groups of investors. For instance, RBC Investment Savings Account (RISA) Series F has no trailing commission, as it’s designed for fee-based accounts, while the RISA Corporate Series caters to business investors.
• Investors who buy ISAs through financial advisors can benefit from professional advice and guidance on managing their overall portfolios and cash flow requirements. 

Example: “After Ngoc sold a large stock position, her advisor recommended investing the proceeds in an investment savings account (ISA). She could earn an attractive rate of interest and still have easy access to the funds.”

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MoneySense editors and journalists work closely with leading personal finance experts in Canada. Since 1999, our award-winning magazine has helped Canadians navigate money matters.

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