Opening a High-Interest Savings Account: Everything You Need To Know
A high-interest savings account (HISA) is one of the many financial accounts available in the Canadian financial market. Whether you're saving money for that Europe trip, to start a family, pay off your student loans, or make a down payment on a house, a high-interest savings account can help make these goals a reality.
High-interest savings accounts offer higher interest than traditional savings accounts (you may have guessed that from the name). With the rise of online and branchless banking, high-interest savings accounts have become increasingly popular.
High-interest savings accounts play an important role in creating a healthy financial future for yourself. Many people like to use a HISA for short-term goals, such as buying a new car or going on a vacation. You can earn interest without the risks of investing or the limitations of many specialized accounts.
Keeping your emergency fund in a HISA gives you confidence that you’ll have money to weather a rainy day. Access and move your funds whenever you’d like without any penalties, plus watch your account grow even faster with compounding interest.
While opening a high-interest savings account is simple, you may have questions about where to open your account and how to maximize your savings.
Here’s our guide to opening a high-interest savings account and what you should know to kick start your savings journey.
How to choose the right place for your HISA
One of the most important things to consider when choosing a high-interest savings account is the interest rate offered.
However, that’s not the only factor to think about. Each financial services provider has specific requirements and perks built within its high-interest savings account, like minimal transaction fees, low service charges, and promotional rates. Some people find these additional features important when choosing the right provider for their high-interest savings account, while others may not think they're a crucial deciding factor.
Here are some tips for choosing an institution with a high-interest savings account that works best for your financial needs.
Compare interest rates
Banks, credit unions, and other financial service providers determine the interest rate for their high-interest savings accounts based on market conditions. Current HISA rates can range from 1-6%¹ depending on base and promotional offers.
Some financial service providers can offer higher interest rates compared to other ones. It’s important to understand whether a high interest rate is a temporary or an ongoing interest rate. Many providers offer promotional rates to attract customers and more deposits, but you’ll earn a lower interest rate once the promotional period ends.
Ongoing rates don’t expire as temporary offers do. Your account earns interest at the ongoing rate until the financial services provider changes the rate they offer. Financial service providers have the right to change their rates at any time. Ongoing interest rates grow your money quicker over time, and you earn consistent interest each month. For example, the Neo High-Interest Savings account offers a steady rate of 4.00% interest².
Consider the financial service provider’s reputation and security
Choosing a reputable institution can give you better peace of mind when you open a HISA. Whether you want transparent customer service or the security of your funds, you want a financial services provider you can trust. It’s challenging and unpleasant to lose your money and your savings progress. You don’t have to open a high-interest savings account with your regular institution, but make sure you choose a financial services provider you trust.
Look at reviews from existing customers and speak to family and friends who have accounts with a specific financial services provider. You want an institution with many happy customers and reviews. Pay attention to mentions of factors that are important to you, such as responsive customer service.
It’s also important to research which financial accounts are eligible for insurance from the Canadian Deposit Insurance Corporation (CDIC). CDIC provides deposit protection of up to $100,000 per depositor per category on eligible accounts. It gives you peace of mind knowing your hard earned money is secure.
Fees and restrictions
Although some financial services providers offer no monthly fees or minimum balance requirements, other providers may have fees like transfer, transaction, and withdrawal fees for moving your funds between accounts.
A minimum balance requirement means you must keep a certain amount of money to qualify for a high-interest savings account with the institution. Read the account details carefully, or call the provider if you have questions.
Step-by-step guide on how to open a high-interest savings account
Opening a HISA is simple. You can open an account in person if the financial services provider has branch locations or fill out the online application. The online application typically takes only a few minutes to complete to get you started on your savings journey.
It’s important to check the requirements and restrictions on the HISA to determine if you’re eligible. Most institutions require customers to be the age of majority in their territory or province and a Canadian resident with a permanent address. Not all HISAs may be available in your province or territory, so check all eligibility criteria before starting your application.
If you want to open a high-interest savings account with your current provider, it should be easy to do so through your online account or by calling customer service, as they already have your information.
Most financial service providers simplify the application process by asking you to provide your personal and employment information to verify your identity and for tax purposes. All you need to do is:
- Provide your legal name, mailing address, and date of birth;
- Provide your social insurance number;
- Provide your phone number and email, especially if you’re opening a HISA with an online-only institution;
- Provide information about your employer, industry, and occupation; and
- Create a username and password to log in to your account.
Some financial services providers may ask you to verify your identity by uploading a copy of a government-issued ID, such as a driver’s license or passport. Once you complete all the steps, you can access your high-interest savings account and start making deposits.
Maximizing returns: Tips for managing your high-interest savings account
A high-interest savings account is a powerful savings tool to grow your money low-risk with guaranteed returns. Here are some tips to get the most out of your HISA.
Make frequent deposits
Saving is an important part of being financially responsible. After paying all debts and expenses, set aside a portion of money into your savings account.
Compound interest accelerates your savings growth as interest accumulates from your principal and the interest earned from previous periods. When you make frequent deposits into your HISA, it grows the principal and interest and increases your account balance.
Let’s say you invest $1,000 in a Neo High-Interest Savings account, earning 4.00% interest² compounded monthly. You’ll have $1,040.74 in your account at the end of one year. If you regularly deposit $100 into your HISA each month, you’ll have invested $2,200 and have $2,262.99 in your account. That’s $62.99 in interest earned during the year.
Use separate accounts for different goals
Organization is key when it comes to financial planning. Some experts recommend having separate accounts for individual savings and investing goals to keep you organized and on track.
For example, you can have an account dedicated to buying a car, one for paying your student debts, and another for emergency funds. It ensures you know how much money you have saved for each goal and what you need to do to reach them.
Start by opening one high-interest savings account and name it after a savings goal, like “Vacation Fund.” Repeat the process for each savings goal until they all have a dedicated account.
You can open multiple Neo High-Interest Savings accounts and personalize the name and icon to your specific goals. Our financial tools help you track your deposits and set targets to encourage saving.
Be consistent
Consistency increases your deposits to generate even more interest each month. Establish a plan on how to save for your financial goals. It helps create good habits that can lead to long-term success.
Set up automatic transfers so you can regularly contribute to these accounts. Automating your savings ensures you never forget to make a deposit. Even if you start with $10 each month and slowly increase the amount of money you deposit each month, your savings will grow over time.
Is it worth opening a high-interest savings account?
Yes, a high-interest savings account is an excellent tool to help make your savings goals a reality! Whether you have a large upcoming purchase or are building your emergency fund, putting your funds into a HISA is a great idea.
In addition to the higher interest rates you get, you earn compound interest on each dollar you have. Compound is when you earn interest from your deposits and accumulated interest from previous periods.
Compound interest accelerates your savings, especially when you contribute money consistently each month.
High-interest savings accounts give you steady savings growth without the risk and volatility of investing. You can access your funds anytime and transfer between your other accounts. It’s important to note that providers may charge a fee if you withdraw directly from your HISA or transfer your funds to another institution.
Which financial services provider has the highest interest on a savings account?
At the time of writing, the current highest interest rate is 6%¹ with promotional offers. Most high-interest rates with traditional banks are welcome offer rates. After the promotional period expires, the rate becomes lower. You’ll likely find higher rates from online institutions. Since they have lower operating costs, they can focus on providing a higher rate and feature-rich mobile apps and websites.
The Neo High-Interest Savings account offers a high stable rate for all customers. You earn 4.00% interest¹ to accelerate your savings and reach your financial goals.
Interest rates can fluctuate based on market conditions and demand. Regularly comparing HISA interest rates helps you find the best rates in the market.
Sign up for a Neo High-Interest Savings account today
Opening a Neo High-Interest Savings account is step one of your savings journey. All you have to do is fill out an application online, which only takes a few minutes.
You can open multiple Neo HISAs targeted toward specific savings goals and track your progress in each account to ensure you’re on the right track. These tools help you stay consistent with your savings habits and build better financial organization skills. Whether you’re saving money for a small or large goal, setting money aside in your HISA guarantees you’ll have enough funds to make those purchases.
The Neo HISA offers 4.00% interest². With no monthly fees or minimum balances, every dollar in your high-interest savings account builds accelerated wealth to help you reach your goals faster.
Deposit as many funds as you want into your account and transfer between your Neo HISAs for free. You can also transfer money into your Neo Money™ account to make transactions and pay bills when you reach your savings goals. The Neo High-Interest Savings account is eligible for CDIC deposit protection³.
Learn more about the Neo High-Interest Savings account and how it can support your financial journey to make your savings goals a reality.
¹ Based on research of high-interest savings accounts, comparing and limited to: BMO, CIBC, Scotiabank, TD Bank, RBC, Simplii Financial, and Tangerine. Research conducted by Neo Financial and based on data taken from public websites on December 17, 2023. Research includes welcome offers.
² Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
³ The Neo High-Interest Savings account is provided by Peoples Bank of Canada, a CDIC member institution, and is eligible for CDIC deposit protection. Deposits held in Neo High-Interest Savings accounts are combined with eligible deposits held at Peoples Bank of Canada, for up to $100,000 of deposit protection, per category, per depositor. For more information about CDIC deposit insurance, please consult CDIC’s website cdic.ca.
