13 hours Ago By Joel Schlesinger
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After all, the more we have the greater the competition for our dollars. Yet with great choice comes equally confounding decisions to be made, even when it comes to savings accounts, high-interest savings accounts (HISAs) and other near-cash investments like guaranteed investment certificates (GICs) and money market funds. “It’s never a bad idea to investigate what’s out there,” says Clay Jarvis, Toronto-based lead investment writer for NerdWallet, which tracks the market for these near-cash vehicles.
Freepik Canadians are likely more keen than they’ve ever been on these low-risk investments. Although the interest rates have come down from a peak a little more than a year ago, the rates these products pay remain higher than for much of the 2010s and first few years of the 2020s. Then there is uncertainty about the economy.
“A lot of people are worried about what will happen to stocks in this environment,” Jarvis adds. Worried or not, near-cash investments are worth investigation for everyone, even investment advisers. “If a client can’t absolutely take on any volatility, then we will use a high-interest savings account for them,” says Grant White, investment adviser and portfolio manager at Endeavour Wealth with iA Private Wealth in Winnipeg.
Often, these accounts serve a role in their investment portfolio, feeding cash into other accounts — like chequing — to fund day-to-day needs. “As advisers, we have the ability to hunt the market for the best opportunities,” he says, noting clients with a HISA are receiving three per cent, plus interest. While modest compared to potential returns in stocks, at least long-term, HISAs paying three per cent are increasingly scarce as the Bank of Canada eases its overnight rate.
The central bank’s guideline serves as the benchmark for HISA and GIC rates, says Kathleen Flear, Toronto-based managing editor of moneyGenius — which also tracks the nation’s marketplace for GICs and HISAs. “So when you see a higher interest rate from the Bank of Canada, you also end up seeing a higher interest rate for a high-interest savings account.” That led to some HISAs offering interest rates as high as six per cent two years ago, she notes.
The best rate today is four per cent as the Bank of Canada has started easing rates. That account, by the way, is from Koho Financial Inc., an online bank.
“Koho’s account is great for earning interest and it can serve as a chequing and savings account.” It even earns reward points, she adds. Like with all accounts, it has drawbacks.
While more flexible than most HISAs, to get the four per cent rate, you must pay a monthly subscription, which can cost as much as $22 or as low as $14.75, if you sign up for a one-year term. “So you want to make sure you’re earning more interest than that fee to make it worth it,” she says, noting Koho also has a no-fee version that pays 2.
5 per cent. Even at that lower rate, it’s better than some other HISAs offered at larger financial institutions. Jarvis notes others may offer five per cent interest, but the rate is promotional, for example, lasting only 90 days.
And it’s generally unclear what the rate will be after 90 days. In part, that is a reflection of the uncertainty around HISAs. Because rates float with the Bank of Canada’s rate, they shift over time.
Now that the central bank is dovish on rate policy, it’s likely both HISA and GIC rates will continue to fall. For the time being, HISAs are the better deal. “It’s less attractive to invest in a GIC right now because the rates are extremely low,” Flear says.
Most GICs pay in the high two per cent to high three per cent range depending on the length of the term. That’s comparable to many HISAs, sometimes even better. But the money is generally locked up.
That might be fine if you seek to put money away for longer periods and don’t need it in the interim. Still, Flear suggests avoiding locking in for too long, like with a 10-year term GICs. It’s likely interest rates could move higher than the roughly three per cent annually those GICs currently offer.
One other choice for individuals seeking a little more interest income are money market funds, White says. “There can be some price variation on a money market fund,” he notes, adding the yield on the Purpose Cash Management Fund, which he uses for some clients, is about 3.5 per cent.
It mainly holds short-term commercial paper, 30-day loans for companies for near cash flow needs, like payroll. Notably, the principal is not guaranteed like it is for GICs and HISAs. Yet even these investments have risks.
The returns GICs and HISAs provide generally don’t keep pace with inflation, especially after tax, so dollars lose purchasing power long term. During Elections Get campaign news, insight, analysis and commentary delivered to your inbox during Canada's 2025 election. This underscores that there is no free lunch.
Then again, many Canadians may find inflation’s erosion of wealth over decades more appetizing right now than sustaining daily losses in the stock market. “With HISAs and GICs, you are not going to lose your shirt if (U.S.
President) Donald Trump goes all in on tariffs,” Jarvis says. “Rates are not going to blow your hair back, but you’re getting a stable way to earn a bit of interest, which is pretty appealing right now.” joelschles@gmail.
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