that rates offered on even the highest savings accounts are below two per cent. This raises the question as to whether the days of actually high returns on high interest savings accounts officially gone?
According to Ted Rechtshaffen, president and CEO at TriDelta Financial, the answer to this question depends on the returns that are being offered on savings at a given time. “If people are getting zero on their money and then an account can pay you three-quarters of a per cent – although it doesn’t feel like it – it’s still a ‘high interest rate’. So, 1.25 per cent, at the moment, for a daily interest savings account is pretty good,” he told BNN Bloomberg. At the moment, the highest non-promotional rate of 1.55 per cent is being offered by Wyth Financial, which is owned by Concentra Bank, based in Saskatoon, Saskatchewan.
There are several factors which are used to determine the rate of a high interest savings account. This includes the benchmark rate of the Bank of Canada, as well as the rates that are being offered by other financial institutions. High interest savings accounts are particularly popular among Canadians, but experts warn that with inflation at a record high, money left in these accounts are losing their purchasing power.
“These high interest savings accounts at 1.25 per cent – after inflation and taxes, you’re behind the eight ball,” Robyn Thompson, founder and president of Castlemark Wealth Management, said. “So it’s really important to try to understand what the savings account is meant for,” she noted that the funds could be for the purpose of an emergency, part of a savings regime for an upcoming purchase of high value or the cash portion of your overall investment portfolio.
Therefore, for those looking for a higher yield on their money, a move up the risk ladder is in order “It all comes down to risk and return, and there’s no free lunch,” Thompson said. She noted that if the individual is looking for an absolute guarantee their money won’t be lost, savings accounts and guaranteed investment certificates are the most suitable option for them. However, here, the return rate between two and two-and-a-half per cent. For anyone looking for a higher yield, mutual funds, exchange-traded funds or individual stocks can be considered. “I think for most people, you start to dip your toe into a portfolio of exchange-traded funds or a mutual fund or a product that gives you diversification across the board that has an allocation towards equities,” she said.
