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Whether you're saving up for a down payment on your first home or building an emergency fund for an unpredictable future, a savings account is a great option to park and grow your money while you work towards your financial goals. A high interest savings account (HISA) provides the added benefit of earning a higher interest rate on your savings.
In this article, you’ll learn how a savings account works, the different types of savings accounts available, and how a high interest savings account can help you achieve your financial goals faster.
How to open a savings account
The first step is to open a savings account and make a deposit. While your money is sitting in your account, it will start to accumulate interest.
Unlike a chequing account, which is designed for frequent withdrawals, a savings account isn't meant for everyday use. Instead, the purpose is to leave your money in the account so it can grow. You can also schedule regular transfers from a chequing account to put your savings on autopilot.
To maximize your interest earnings, you should limit withdrawals or transfers out of the account.
Benefits of a savings account
A savings account offers many useful benefits, including:
- Safety: Putting your money in a savings account is much safer than stuffing it in a cookie jar or under your mattress because it's insured by the Canada Deposit Insurance Corporation (CDIC). CDIC insurance protects your deposits if your financial institution fails (goes bankrupt).
- Liquidity: Compared to putting your money in a Guaranteed Investment Certificate (GIC), a savings account allows you immediate access to your money should you need it.
- Interest: Putting your money into a HISA allows you to earn more passive income through interest than you would with a regular savings account. Interest is the amount a lender charges to loan money. Or, in this case, the interest rate is the amount of money you are awarded for saving your money in a HISA. The interest rate you earn can vary based on where you save your money, how much you save, and how long you save. While all savings accounts offer a small amount of interest (0.20-0.30%), a HISA with Scotiabank has the potential to earn much more.
- Reduce temptation: Putting your money into a savings account can help reduce the temptation to spend.
- Preparation: Using a savings account to grow an emergency fund is a great way to prepare for the unexpected.
- Organization: Some savings accounts allow you to organize your money into different buckets so you can clearly define your individual savings goals and fund them accordingly.
Types of savings accounts
There are a variety of savings accounts you can use. The one that's right for you will depend on your specific needs and savings goals.
- High interest saving account
A high interest savings account is just what it sounds like. It's a savings account that has a higher interest rate than a regular savings account. The benefit of a HISA is that it can help you increase your savings faster over time. Scotiabank offers several HISAs, including the MomentumPLUS Savings Account, which allows you to save for multiple goals conveniently in one account. - Youth saving account
Use a youth savings account to encourage your children to start saving early. A youth account is specifically designed for young people and Scotiabank offers a youth account for those 18 years and younger called the Getting There Savings Program for Youth. - Student savings account
A student savings account is specifically for those getting ready to head off to post-secondary. Scotiabank offers the Student Banking Advantage Plan with benefits like no monthly account fees and rewards on debit transactions. - Foreign currency savings account
A foreign currency savings account allows you to save currencies other than Canadian dollars and earn interest. Scotiabank offers two foreign currency accounts: the Scotia U.S. Dollar Daily Interest Account and the Scotia Euro Savings Account.
How much money should you keep in savings?
The exact amount you choose to keep in your savings account will depend on what you can afford to save as well as your savings goals. However, it's recommended that all Canadians can benefit from having an emergency fund. Many experts suggest having between three to six months of total living expenses. If you also have goals of saving for a special trip or a new car, you can increase your savings accordingly.
High interest savings account vs. regular savings account
A regular savings account and HISA both allow you to earn interest on your account balance. A HISA can help you to supercharge your savings and reach your savings goals even sooner as it typically has a higher interest rate.
With high-interest accounts like Scotiabank's MomentumPLUS Savings Account, the longer you save, the higher the interest rate . You can choose between different premium periods to save your money for (90, 180, 270 and 360 days) and track your savings along the way. That’s not all, this account has no monthly account fees and there’s no minimum balance required. With Scotiabank's Savings Accelerator Account, the longer the premium period you choose for your account, the higher your interest rate.
Who should have a high interest savings account?
A HISA has the potential to benefit most Canadians.
The days of saving your money in a coffee jar on the counter are over. Not just because this can make it tempting to spend it, but also because of inflation.
Simply put, inflation is when the cost of things goes up. A carton of milk or a bag of apples costs more today than it did a year ago. The bottom line is if you aren't earning interest on your savings, then your money is losing value over time.
The point of having a savings account is to help you prepare for emergencies and save for short and long-term financial goals (buying a house, paying for a wedding). Keeping your money in a HISA or any savings account allows you to grow your money while also offering quick access to your funds when you need them.
