I see this question all the time on financial chat boards. The sad part is there is really no place where you can get much return on your money if you need to keep the principal safe and you need to use the money in 1-3 years. I know because we often save up money for a new home renovation or a major vacation in advance and I’d love to make some profit on that money while it sits waiting. (Yes, it’s true: we do not use a HELOC to fund our renovations or our vacations. We actually SAVE the money before we need to spend it. There are more Canadians like us than you’d think if you listen to the endless radio ads for using a HELOC to build a Sasquatch farm.) Even though the return will be low, though, I still need to check where to put this money we’ve set aside for a new furnace so where can I get the best rate for 2 years?
What Rate Can I Get for a Daily Interest Savings Account Deposit at the Big Banks?
The interest rate I can get by just putting the furnace money into a savings account is tricky to estimate because so many banks are now offering short-term rate bonuses. But let me see what I can find today, November 3, 2105.
First, the Big Canadian Banks
BMO Savings Accounts
Today, BMO has a “Savings Builder Account” where you only get 0.3% on your savings unless you add at least $200 a month, in which case you get a bonus interest rate for that month of a fraction of 1% annual interest. In theory if you added at least $200 a month every month you’d get about 1.3% on your money. It’s a possibility for someone just building up the savings for a trip or home repair, but it’s a bit more complex than I need given I already have this chunk of money saved up. (There may be fees to use this account.)
BMO’s regular high interest savings account is offering 0.5% today. (There may be fees to use this account.)
CIBC Savings Accounts
For their eAdvantage Savings Account, CIBC is offering 0.6% but only if you have a minimum balance of $5000. You can also earn an additonal 1.15% per year (but since it’s only an offer till February 29 2016 that’s not possible because there isn’t a year left to earn it during) on new deposits above your previous balance. (There may be fees to use this account.)
Rates on their other accounts as listed today are much lower.
RBC Savings Accounts
RBC has a high interest eSavings account paying 0.65%. (There may be fees to use this account.)
ScotiaBank Savings Accounts
ScotiaBank has a confusing array of accounts paying from 0.9% – 1.5% if you have $5000 or more to deposit. (There may be fees to use these accounts.)
TD Savings Accounts
TD seems to have a high interest savings account paying 0.55% today on balances over $5000. (There may be fees to use this account.)
None of these offerings from the Big Banks seems particularly good to me and all of them require me to read a lot of fine print to be sure what, if any, fees they are charging.
What Rate Can I Get for a Daily Interest Savings Account Deposit at the No Fee Online Banks?
This is where it gets really murky because of all of the special, limited-time offers.
Tangerine Savings Accounts
For example, in July I accepted an offer from Tangerine for 3% annual interest payable on my savings account balance for 180 days. This was a special rate offered to customers who keep shifting large amounts of cash in and out of their Tangerine account. I had to have at least $10 000 in my account to get this rate (which I did have because we need a new car sometime between now and five years from now as well as a furnace. If someone can accurately predict how long my 1998 Corolla is good for, please let me know!)
Today, though, the best offer I can see from Tangerine is no where near that high. For a regular savings account with no fees and no minimum balance, Tangerine is paying 0.8% per year.
If you have never had a savings account, RRSP, RRIF or TFSA account with Tangerine, they have a special interest rate offer in effect. You could earn 2.4% per year (but not for a whole year, so that’s not really true) on your deposits for 6 months from the day you first open your first account. Remember if you open the account on say, November 5, the clock starts ticking then, even if you don’t put the money in until Jan 5.https://www.tangerine.ca/en/landing-page/rateoffer/index.html The offer started September 1 and could be withdrawn at any time, so don’t sign up for a new account without making sure you will get the offer! Also, it looks like the rate is actually the regular interest rate plus 1.6%, so if the regular rate goes down, so will the total rate.
I like Tangerine and use it regularly, but I do move my money in and out to take advantage of better rates if they come up, especially from PC Financial.
President’s Choice Financial Savings Accounts
So what does PC Financial have on offer right now? Well, they also have a short-term bonus rate. There’s is 2.6% on new balances. Oops, no sorry that’s only for TFSA and RRSP deposits.
OK, what do they offer for their no-fee savings accounts? Well, they are matching Tangerine’s 0.8% per year for regular savings in their no-fee Interest-Plus savings account. I don’t see an ad for a current bonus rate offer. They often have them, though, so it’s worth keeping an eye out on their website. In the spring of 2015, I was getting 2.5% per year for a few months from PC Financial.
Oaken Financial (Home Trust) Savings Accounts
I also have a savings account at Oaken Financial which I use to move money in and out of GICs for our emegency fund.
The Oaken no-fee Savings Account is paying 1.75% per year on any balance.
That is a good rate!
This is just a savings account, by the way. There are no ATMs and no way to get cash from the account directly. You have to transfer your money to another bank, or wait for them to send you a cheque in the mail, if you want to get your money out. I linked our account to one of our other banks and transfer the money back and forth. As usual, it takes several days (about 5) for the money to be available to spend again from my other bank account. That said, I am talking about where I want to park money for a year or two, so the usual bank hold times on transfer are not a problem.
Oaken has been paying a good rate like that for the year I have been with them. I have not had to apply for any special offers, etc, to get their best rate.
Since last I worried about cash deposit rates, another eBank has opened and started playing the short-term higher-interest-offer game. Zag is apparently owned by the Desjardins Group. Like the other banks mentioned in this article, it belongs to CDIC so your cash savings deposits are insured up to $100 000.
Like PCF and Tangerine, Zag is offering a base rate for their no-fee Savings Account of 0.8%.
Right now (November 3, 2015) they also have a short-term offer. If you open a savings account before November 15 and keep $1000 in it, you will earn a 2.5% annual interest rate (although you can’t really because the offer ends before a year term) on any deposits until March 20, 2106. You can read the details on their website. https://www.zagbank.ca/fineprint/fall2015
I don’t have much experience with credit unions and there are some that are only really servicing certain markets such as the GTA and the Vancouver area. I strongly suggest you do look at what they have to offer, though, as often they have good rates and no or low fees for savings accounts.
Which eBank Would I Recommend Saving Your Money In?
As I’ve mentioned, I have an account at 3 of the 4 eBanks described in this article.
If you don’t mind having several bank accounts and if you are organized enough to transfer your money every few months to take advantage of new interest rate promotions, then I recommend you also open an account (if it is no fee and no minimum balance!) at each of these banks. This past 12 months I have been able to earn 2.5-3.1% per year rates using this transfer method.
If you want to “set it and forget it” I would recommend opening an account at Oaken Financial. Keep an eye on their rate when you receive your statements, though, in case they suddenly drop the rate.
What Other Ways Can I Invest My Money Safely for the Short Term?
I’d like to write an article about investing in GICs and cashable term deposits to go with this review of daily interest savings accounts. I’ll link to this article when that gets written.
In the meantime, I’d like to say that there is no way to invest in the stock market, not even through a market-linked GIC, for the short-term (5 years or less) that is safe. There just isn’t.
Do you keep your vacation, reno, new car, or emergency fund money in cash? Where do you like to park it to get the best return?