Want more money? Very few of us would refuse an extra pay day, but it’s a matter of how we grow our money that might just stop us in our tracks. Where do you begin and how do you know what option is best for you?
One of the best ways to grow your money fast and maximize your savings is through a high-interest savings account. Although not all of these accounts are made equal, we break it down for you, from how they work to what you should consider when opening a high-interest savings account.
What is a high-interest savings account?
It’s all in the name. High-interest savings accounts help you earn money on the cash you save by generating interest on the balance in your account.
Compared to basic savings accounts, which generally earn you a very small amount of interest, high-interest savings accounts are a great way to earn more on the money you’re already putting away for a rainy day.
It may seem simple enough, but there are varying interest rates, fees, and withdrawal rules that can make it tricky to understand which account will help you grow your money in the fastest and simplest way possible.
How do high-interest savings accounts work?
The standard high-interest savings accounts from big banks aren’t typically used for day-to-day banking, so there aren’t many transactions for the bank to process, which keeps costs down and interest rates high.
In the world of digital banking, online banks are branchless. Technology companies like Neo have a similar model so the costs cut can be re-distributed to customers, resulting in better experiences and greater benefits for the account holder in the form of high-interest rates and earnings. Check out the best high-interest savings accounts in Canada.
7 things to consider when choosing a high-interest savings account
1. Super high introductory rates can be misleading
Many big banks offer high-introductory rates to get new customers to sign up, but those rates don’t last long. These types of intro offers aren’t the most rewarding in the long term, especially if you are just starting to build your savings.
2. Initial deposit minimums might limit your choice of accounts
Keep an eye out for any strings attached. Some banks require an initial deposit for a certain dollar amount to open up a high-interest savings account. This might limit your options for an account if you don’t have a lump sum to deposit right off the bat.
3. Minimum balance requirements make your money harder to access
Depending on the fine print, you might be required to keep a minimum balance in your account at all times. Usually, the penalty for having your balance dip below the minimum comes with additional fees or invalidated interest earnings. This can be particularly challenging if something unexpected happens and you need access to your money quickly.
4. Fees for basic transactions can add up
Many high-interest savings accounts are free to open, but there may be additional transaction fees you didn’t see coming. A lot of big banks will charge fees for basic transactions, including e-transfers or monthly statements.
Because of these fees, many high-interest savings accounts are not well-suited to your everyday banking needs.
5. You may not be able to link your existing bank account
Some financial institutions won’t allow you to link your account with other banks or accounts. This can be a huge pain if you want to set-up auto-deposits or make quick transfers between accounts. With Neo, you can easily link other bank accounts for quicker and more seamless access to transferring funds.
6. Deposit options should make your life easier
Making sure you can seamlessly deposit money into your account is important. You don’t want to be stuck mailing in cheques every month. Making sure your savings account can support e-transfers, and other mobile payment options is a must in your busy life.
7. You shouldn’t need a computer to manage your money
Some banking apps provide less than ideal experiences, to say the least. Selecting an account that prioritizes a seamless, digital-first experience helps ensure that you can pay your bills and meet your financial goals from anywhere at any time.
How does the Neo high-interest savings account work?
The Neo Savings account was designed to help you grow your savings and reach your goals faster. For starters, our interest rate is 1.55%*. That means you can earn up to 30x† more interest than traditional banks, where the average interest rate is 0.05%. Neo Savings also compounds interest daily and pays it out to you monthly, so you can rest easy knowing that your money is working for you.
Unlike other high-interest accounts, the Neo Savings account is an all-in-one account, created to help you grow and manage your money. It comes with all of the features you’d expect from an everyday bank account so you can pay bills, transfer between accounts, and send money to your friends, in addition to saving and earning interest.
Plus, you can take advantage of other innovative products including a cashback rewards credit card that can be easily paid off directly in our app.
Even better, you can manage your money without the monthly fees that come standard with other bank accounts. So you always have access to your money when you need it, with no overdrafts, transfer fees, initial deposit minimums, or balance requirements.
How much interest can you earn with Neo?
How much you earn will all depend on how much and how often you make deposits to your account. For example, if you were to start with a $1,000 deposit and make regular contributions of $200 each month, in one year you could earn $32.73 in interest, alone.‡
It may seem small after just a year, but if you continue at that pace, in two years you’d earn $103.14, and by year three: $212.72.‡ That’s a big reward for simply saving your money in one account.
How to open a Neo Savings account
Opening a Neo Savings account is easy. Download the app, have your government ID ready, and snap a selfie. Once you’re approved, you can start depositing, saving and watch your money grow within minutes.
Learn more about Neo Savings and open your account today.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
†Based on research comparing high-interest savings rates of Canada’s ‘Big 5’ banks using a $100 investment, excluding promotional rates and rate premiums. Research was conducted by Neo Financial and based on data taken from public websites as at January 11, 2021.
‡Based on an interest rate of 1.55%*, calculated daily on the total closing balance and paid monthly. Void of tax, inflation or other variables which may impact savings.
The Neo Savings account is provided by Concentra Bank, a CDIC member institution, and is eligible for CDIC deposit protection. Deposits held in Neo Savings accounts are combined with eligible deposits held at Concentra Bank, for up to $100,000 of deposit protection, per category, per depositor.