Is Your Savings Account Giving You Free Money?
Are you building an emergency fund, but you hate watching it sit stagnant in a typical savings account?
You don’t want to invest it, but you still want to see some type of growth. What do you do?!
Let me introduce the HISA. A High-Interest Savings Account.
I remember when I was scared of the word interest because it meant I was paying someone else. In the case of a HISA, the bank pays you for giving them access to your money! Does it sound crazy for a bank to give you free money? Let me explain!
Banks aren’t only relying on your fees to stay afloat. When you deposit your money into your bank account, the bank can lend it to other people with an interest rate, and that’s how they get some of their profits. You know that penny your savings account earned? It was just a sliver of the pie. But what if there was a savings account that shared more of the pie with you?
Meaning you get more money just for having money in the bank. That’s exactly what a High Interest Savings Account (HISA) does!
Most brick-and-mortar banks offer savings accounts that earn 0.05% interest. That means you’d make about $10 a year on a 20K savings account. Online banks tend to share more profits with their clients. That means you get more money in your pocket!
Digital banks like EQ Bank, and fintech companies like NEO, operate online and offer some of the highest HISAs in Canada.
Neo Financial offers 1.3% while EQ Bank comes in close at 1.25%
Why should you use a HISA instead of a regular savings account?
Besides the obvious answer of “Free money!!” you also have to think about inflation. It’s dangerous to wrap up every extra dollar you have in investments, but it can be just as damaging to leave your money sitting stagnant. A HISA meets you in the middle; it might not keep up with inflation, but it doesn’t leave you completely behind either.
A High Interest Savings Account is where you should keep your Emergency Fund.
It’s also ideal for any big chunks of money that you don’t plan to invest, like a car maintenance or holiday sinking fund. Different institutions offer HISA’s, each with its own rules and interest rates. Choose one with insurance, no fee, no minimum balance, and high interest. I already listed a couple above to help you get started!