Should I open a high-interest savings account?

Have short-term savings goals or cash sitting idle in a chequing account? A high-interest savings account (HISA) might be worth opening. It’s an optimal spot to park money that you want to grow but need to keep accessible, like for an emergency fund or money for that big trip you've been planning.

With a HISA, you get higher interest rates than a standard savings account, without the contribution limits of a tax-free savings account (TFSA) or the locked-in nature of a guaranteed investment certificate (GIC). Your money stays liquid, earns predictable returns, and is insured by the Canada Deposit Insurance Corporation (CDIC)¹, making it a strong fit for anyone who wants growth without market risk. But before opening a HISA, consider how it fits into your overall financial picture.

Five signs a HISA is right for you

Not sure if a HISA fits your situation? Here are five signals that indicate opening one might be the right move:

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1. You have cash sitting in a chequing account. If your savings aren't earning interest, you're leaving money on the table.

2. You're building an emergency fund. A HISA keeps your safety net liquid and earning at the same time.

3. You're saving for something in the next one to five years. A down payment, a car, a vacation—short-term goals are where HISAs shine.

4. You want growth without risk. No market exposure, no guesswork. 

5. You have low-interest debt. A HISA can work alongside your repayment plan rather than competing with it.

Understand your financial goals

Before opening any account, understand if it fits within your overall financial outlook. Each account has specific purposes and benefits that you can maximize to get the most earnings.

Short-term financial goals

Short-term financial goals refer to anything within a five-year window—think paying for tuition, buying a car, going on vacation, or buying an expensive item. If you need to access your money within that timeframe, you likely want something with no market risk. That's exactly where a HISA fits. 

Because your time horizon is shorter, there's less room to recover from a down year in the market. A HISA gives you growth while keeping your money accessible when you need it.

Long-term financial goals

For goals that are five or more years out—like retirement, buying a house, leaving an inheritance, or paying off a mortgage—an investment account may be a better choice than a HISA. Investment accounts give you the opportunity to chase higher returns and ride out short-term volatility.

That said, high-interest savings accounts can still play an important role in long-term financial planning. An emergency fund housed in a HISA gives you a cushion for life’s curveballs like job loss or medical expenses, without forcing you to liquidate investments at a bad time.

Assess your current financial situation

A HISA works best as one piece of a broader financial picture. Before opening one, consider where you stand across a few key areas.

Savings and debt

If you're building savings while carrying debt, the math matters. If your debt's interest rate is higher than what your HISA earns, prioritize paying it down first. If your debt rate is lower than your HISA rate (this is common with low-rate student loans or mortgages), you can save and pay down your debt at the same time.

Expenses

Track your fixed expenses (rent, insurance, phone bills) and flexible ones (gas and groceries) to understand how much money you have left over each month. Most people use a chequing account for day-to-day bills. This can work hand-in-hand with a high-interest savings account. You can earn interest on your money before transferring it to your everyday account to pay for your expenses.

Risk tolerance

If you have a low risk tolerance and want predictable returns, a HISA is a natural fit. If you're comfortable with market fluctuations and have a longer time horizon, you might allocate more toward stocks, mutual funds, or ETFs. But even as you start investing, a HISA can provide a layer of balance and stability to your portfolio. 

Other factors to consider before opening a HISA

Beyond your personal debts, outflows and risk tolerance, you’ll also want to consider a few external factors:

Interest rates

Understanding how interest rates work can help you predict how much you can earn on your savings. Different providers also offer different rates, so be sure to compare your options and check what their ongoing rates are—not just their short-term, promotional offers. See what counts as a good savings rate in Canada before you commit.

Inflation

Inflation decreases the value and spending power of your money over time. The compound interest earned from a high-interest savings account can help counter inflation by allowing your money to grow over time.

Fees

Some financial services providers may charge monthly fees for keeping a high-interest savings account open, while others offer no-fee HISAs. Some institutions may also charge fees for transfers or other transactions, so make sure to review the account terms carefully. 

Benefits of a high-interest savings account

High-interest savings accounts offer a few distinct advantages over standard savings accounts and other short-term savings tools.

• Higher interest rates: High-interest savings accounts offer higher rates than regular savings accounts. Your earnings outpace the return you would get from keeping money in a traditional savings account.
• Compound interest: On top of higher interest rates, HISAs function on compound interest. This means it isn’t only the amount you deposited that accumulates interest—anything you’ve already earned does too. 
• Accessibility: While pulling savings out of your account isn’t ideal, life happens. A HISA grants you easy access to your funds, allowing you to withdraw anytime. 
• Deposit insurance: CDIC covers eligible deposits up to a maximum of $100,000 per insured category, per depositor.
• Ability to open multiple accounts: You can open multiple high-interest savings accounts and personalize them to specific savings goals.

Open a Neo Savings account

No minimum balance requirement, and an interest rate that grows with you? That’s the Neo Savings account formula. Start with 2% interest on the free Neo Essentials membership, and get up to 2.75%² interest with the Neo Grow membership ($14.99 per month).

Open a Neo Savings account in as little as three minutes.

FAQs about opening a high-interest savings account

When should I not open a HISA?

Opening a HISA probably isn’t the right move if you’re carrying high-interest debt, like credit card balances, where the interest you owe is higher than what you’d earn in savings. If this sounds like you, look into a debt repayment plan before opening a new account or actively saving most of your money. A debt repayment calculator or credit card debt consolidation calculator can be useful tools.

If you're thinking of putting away money for long-term goals (think retirement or a timeline of over five years), investing may offer higher growth potential. And if an account comes with high fees or minimum balances that would wipe out your potential earnings, the math just won't work—even with a competitive rate.

HISA vs. TFSA: Which should I open first?

It depends what you’re saving for. A tax-free savings account shelters your earnings from tax, so if you have contribution room and plan to keep cash savings for a while, holding savings in your TFSA can make sense. You get liquidity and your earnings aren’t taxed.

A non-registered HISA may be a better fit when you’ve maxed your TFSA room, need a dedicated account for a specific short-term goal, or want a simple place for an emergency fund without using the contribution room you’d rather reserve for investments. Many people use both: a TFSA for tax-efficient savings and growth, and an account like Neo Savings for accessible cash they may need sooner.

How much should I keep in a HISA?

There's no right or wrong amount to save, but a common approach is to put away three to six months of essential expenses in a HISA as an emergency fund. This should give you enough to cover rent, bills, and groceries if your income changes.

Beyond that, keep in a HISA what you’ll need in the next one to five years: a down payment fund, tuition, a car, or a big trip. If you're open to exposing your principal to some market risk, consider putting money you won’t touch for the next five years or more towards investments instead. It's more volatile, but can potentially lead to larger returns.

Is a HISA worth it if I already have a regular savings account?

Yes, if your current account pays a low ongoing rate. The gap between a standard savings account and a HISA can be several percentage points—and that adds up on balances you keep for months or years.

Compare ongoing rates, not short-term promos. If the difference would only earn you a few dollars a year on a small balance, switching may not be urgent. But if you’re parking a meaningful amount for an emergency fund or a near-term goal, moving to a HISA is usually worth the effort. With Neo Savings, there’s no minimum balance, so you can start earning on whatever you’re able to set aside.