The one inflation tool you need for your finances

But first, let’s back up a bit. In December, the year-over-year rate of inflation in Canada was 6.3%, and prices for everyday expenses like groceries and gas continue to climb. Inflation decreases the value of a dollar over time (because as prices rise, you can buy less with the same amount of money). The Bank of Canada (BoC) has raised interest rates many times in the past year in an effort to tame inflation. That means it costs more to borrow money, but here’s the good news: You can also earn higher interest on your savings. 

You may want to take advantage of the especially high rates on high-interest savings accounts. They earn more interest than regular savings accounts, meaning your balance can grow faster.

How high-interest savings accounts work 

As you can guess from the name, a high-interest savings account pays more interest than a regular savings account. Using a HISA is a great way to save up for a big purchase, build an emergency fund or just earn more interest on your money. Interest is calculated daily and paid monthly. The interest rates on HISAs likely won’t cancel out the impact of inflation, but they may help you preserve more of your purchasing power than a regular savings account will. 

You can open a HISA at a traditional bank, an online bank, a credit union or a fintech bank, and—unlike with a bond or a guaranteed investment certificate (GIC)—you’ll always have easy access to your money.

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Simplii Financial High Interest Savings Account

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Simplii’s HISA has no transaction fees or monthly fees, and no required minimum balance.

Welcome offer: Earn 6.00% interest on eligible deposits for five months. (Limits apply. Offer ends Jan. 31, 2025.)
Interest rate: 0.35% to 3.75% (depending on your balance)

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What to look for in a high-interest savings account 

It makes sense to comparison shop for high-interest savings accounts, especially if you plan to deposit a lump sum of money or even set up automatic deposits. Compare these three key account features. 

1. How high is the interest rate? 

The regular (non-promotional) interest rates on HISAs can range from 0.05% to 3% a year. Regular savings accounts earn interest as low as 0% to 0.05%. 

Keep in mind that promotional rates are typically much higher and only available for a limited time—usually a few months. Given current economic conditions, interest rate offers are more generous than they were in the past. 

Right now, Simplii Financial’s High Interest Savings Account is paying new clients 6.00% interest on eligible deposits for the first five months since the account was opened. The offer ends Jan. 31, 2024. Simplii’s regular interest rates range from 0.40% to 2%, depending on the account balance. The additional promotional interest is paid at the end of the offer period. 

2. What are the account fees? 

Some high-interest savings accounts charge transaction fees, usually a few dollars per withdrawal, transfer or bill payment that comes out of your account—that can really add up. It is less common for these accounts to charge a monthly fee, because they’re intended for storing your money over a longer period of time. However, some banks or financial institutions require account holders to maintain a minimum balance in order to avoid paying these monthly fees. 

Other savings accounts, like those available at Simplii Financial, charge zero fees for your transactions and have no minimum balance requirements to worry about. 

3. Is the account eligible for CDIC insurance?

Before you open a new account, check if the bank is a member of the Canada Deposit Insurance Corporation (CDIC). If it is, CDIC will protect your savings of up to $100,000 in eligible accounts if the member institution becomes insolvent (extremely rare, but not impossible). 

Traditional banks and credit unions aren’t the only financial institutions that are CDIC members—many digital banks are, too. Deposits in Simplii Financial’s High Interest Savings Account, for instance, are insured by the CDIC. National research firm Ipsos recognized Simplii as offering the best value for money and an excellent mobile banking experience, as well as being one of the most recommended financial institutions of 2022.

Another reason to open a high-interest savings account 

You might be asking, “Do I really need another bank account?” In addition to the reasons above, having a HISA can help you separate your everyday spending from the money you’re saving towards a financial goal, such as taking a trip, paying for tuition or adding to your emergency fund. You can set up automatic transfers from your chequing account to your HISA once a month or after each payday, for instance. It’ll feel rewarding to watch the balance grow. 

If you’re saving up for something, figure out how much you’ll need to pay for it. Then, calculate how much money you can set aside each month by subtracting your expenses from your income. (Quick tip: Next time you log in to your online bank account, export your recent transactions into a spreadsheet.) Now, divide the cost of your future purchase by the amount you think you can save each month to see how long it will take to hit your target. If you’re saving for a vacation or a down payment for a home, this will help you create a realistic timeline that shouldn’t put you into debt.

A high-interest savings account is a great option to save up for a financial goal or to give yourself the added peace of mind of having an emergency fund. (Have a goal and want an emergency fund? Open more than one HISA.) Be sure to look into the different account features and welcome offers available to help yourself decide where to park your savings. 

Read more about banking:

• Is your chequing account working hard enough?
• What the Bank of Canada’s latest overnight rate hike means for your finances
• What is an emergency fund and how to build one
• Does buying GICs still make sense after the recent rate cuts?

About Margaret Montgomery

Margaret Montgomery is a former MoneySense editorial assistant and MoneyFlex columnist. She studied business administration at Wilfrid Laurier University and journalism at Centennial College.

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