A high interest savings account (HISA) is a bank account that offers a higher interest rate than a traditional savings account. With a HISA, you can reach your short-term financial goals faster simply by holding a balance in your account. The higher your balance, the more you can earn.
3 Creative Ways to Use a High Interest Savings Account
Whether you want to save for an upcoming vacation or build your rainy-day fund, a HISA is a versatile financial tool that allows you to save for anything you want. Here are three creative ways you can use a high interest savings account to boost your savings.
Grow your emergency fund
You can’t always anticipate when you will lose your job or when your furnace will break down,. Having an emergency fund with enough savings to cover three to six months’ worth of expenses can help you prepare for an emergency and provide peace of mind.
With an emergency fund, you’ll need a safe and reliable place to store your money. Investing in the stock market, where your funds are subject to risk, means you could lose your emergency savings anytime. A high interest savings account provides a higher interest rate than a traditional savings account; but also offers security. In a HISA insured by the Canadian Deposit Insurance Corporation (CDIC), you can rest easy knowing your money will be there when you need it.
Save for short-term goals
A HISA is also a useful place to store money for short-term goals. A short-term goal generally refers to a time horizon of six months to five years. Putting money aside for a vacation, wedding, home improvement, or a new car are all examples of common short-term goals.
Saving in a HISA can help you to achieve your short-term savings goals faster. Not only can you earn a higher rate than in a regular savings account, you can also earn a higher rate on higher balances.
Inflation is the increase in the price of goods and services over time. As inflation goes up, your purchasing power goes down. If you continue to hold your money in a cookie jar or a traditional savings account, you will miss out on a higher interest rate and an opportunity to grow your savings. You can use a HISA to minimize your losses in a high-inflation environment. For many, a HISA offers an ideal combination of moderate returns and low risk.
The Bottom Line
Whether you’re trying to build an emergency fund to provide peace of mind, set money aside for a dream vacation, or keep up with the rising cost of living, a HISA is a safe, flexible, and convenient way to grow your savings faster.