Is a High Interest Savings Account Worth it?

A high interest savings account (HISA) can help to diversify any savings portfolio. Not only does it offer a higher interest rate than a traditional savings account, but it’s also a safe and flexible place to grow your money without a monthly fee. Whether or not a high interest savings account is worth it for you really depends on what you’re saving for.

How to Determine if a High Yield (Interest) Savings Account is Worth it?

When trying to decide if you want to add a high yield (interest) savings account into the mix, you can consider the following variables:

Interest rate

If you keep your money in a traditional savings account that offers an interest rate lower than the average rate of inflation, you are essentially losing money on your savings. The main benefit of a HISA is that it offers an interest rate higher than a traditional account plus the ability to earn more when you save more. So, saving your money in a HISA can help to minimize your losses.

Safety

When you’re trying to build an emergency fund or save for a short-term goal, such as a down payment, investing in the stock market might seem like an easy way to earn a higher return. While there is potential to earn more, you also risk losing more.

Saving your money in a HISA with a financial institution that is a member of the Canada Deposit Insurance Corporation (CDIC) provides the peace of mind that your money is safe. Each eligible account carries deposit insurance up to $100,000.

Accessibility

If you need access to your money on a daily basis, a HISA might not be the best fit for you. You have to let your money sit to take advantage of compounding interest and watch your savings grow.

Withdrawal or transaction fees

Regular withdrawals from your HISA can also lead to transaction (or withdrawal) fees. Some high interest accounts offer several free monthly withdrawals. Once you’ve hit your limit, you may incur withdrawal fees that can eat into your savings. You can avoid transaction fees by transferring money from your HISA to an account with transactions included. 

The Bottom Line

Compared to a traditional savings account, a HISA offers the chance to earn more on your savings. If you have some extra money set aside for a short-term goal, a high interest savings account can help you grow your money virtually risk-free. When deciding if a HISA is worth it, consider the interest rate you want to earn, how safe you want to keep your savings, and how often you’ll need access to your money.