Creating an Emergency Savings Plan with High-Interest Accounts

High-Interest Savings Accounts are an excellent tool for goal-oriented savings. They not only provide attractive interest rates and often waive monthly fees, but they also represent a secure and practical option for stashing away your money.
Bruce Hodges
November 12, 2023
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Creating an Emergency Savings Plan with High-Interest Accounts

It's vital to have a financial buffer to fall back on when the unexpected occurs. This could be in the form of unanticipated healthcare costs, essential vehicle maintenance, or a gap in employment. An emergency fund is not just a financial strategy, it's a stress-reliever and security blanket. Opting for high-interest savings accounts (HISA) is an excellent strategy for those aiming to nurture their savings while maintaining ease of access to their funds.

Let’s demystify High-Interest Savings Accounts (HISA). A High-Interest Savings Account (HISA) offers a superior interest rate compared to conventional savings accounts, providing several advantages:

  • Enhanced interest earnings: A HISA can offer an interest rate that's markedly higher—potentially 15 to 20 times more than traditional savings accounts. This acceleration in earning potential means your savings could increase significantly over time. Just imagine the potential growth of your savings with such rates!
  • Absentee monthly charges: A good number of HISAs come without monthly fees, allowing you to reap the full benefits of the interest accumulated.
  • Accessibility: HISAs are generally insured, safeguarding your savings up to certain limits. Moreover, these accounts are often accessible digitally, which means you can manage your funds via online and mobile banking.

Why aren’t standard savings accounts as beneficial as HISA? Banks furnish a variety of savings accounts, each with distinct features to cater to diverse saving goals, like funds for education or retirement. HISAs are simply one of many alternatives, crafted to attract and retain customers, resulting in increased deposits and subsequent lending activities - all of which culminate in profit for the banks.

Convinced? Here’s how to harness a HISA for your emergency fund. An emergency fund acts like a life raft, ready to keep you afloat financially during tumultuous times. It’s prudent to accumulate an equivalent of three to six months’ worth of expenses in this fund.

Step 1: Select Your Ideal Account Here are some stellar choices:

  • Simplii Financial, boasting a 6.00% APY
  • Scotia Momentum Plus, with a competitive 5.60% APY
  • Motive Financial, offering a solid 4.10% APY
  • CIBC eAdvantage, also at 5.60% APY

Step 2: Spell Out Your Monthly Savings Target

Begin by setting a tangible savings goal, ensuring your budget affords a slice of your income for this purpose. The most efficient method is to automate your savings directly from your salary, allowing your HISA to accrue interest effortlessly and hasten your progress towards your financial target.

Step 3: How to Channel Your Paycheck into a HISA You can opt to:

  1. Automate transfers from your existing bank account, or
  2. Preferably, set up direct deposits through your employer.

Both methods typically involve logging into your respective portals, entering your HISA details, and deciding on your transfer preferences. Following this setup, your chosen amount will routinely flow into your HISA, padding up your emergency fund without requiring active management on your part.

Final Thoughts High-Interest Savings Accounts are an excellent tool for goal-oriented savings. They not only provide attractive interest rates and often waive monthly fees, but they also represent a secure and practical option for stashing away your money. If you're in pursuit of a reliable reserve for your financial aspirations, opening a HISA could be a wise move to make today.

Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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