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Is there really such thing a thing as a high interest savings account today? Canada’s big banks think so.

Submitted for your consideration:

  • Desjardins High Interest S@vings Account
  • HSBC High Rate Savings Account
  • National Bank High Interest Savings Account
  • RBC High Interest eSaving
  • Simplii Financial High Interest Savings Account
  • TD High Interest Savings Account
  • VanCity JumpStart High Interest Savings Account

These accounts pay a standard rate of 0.05 or 0.1 per cent, which in no way qualifies as high interest. The more apt description is pitiful. Savings accounts from alternative banks pay standard rates of as much as 1 to 1.5 per cent, while a 12-month Government of Canada T-bill has a rate of 1 per cent these days. High interest savings accounts packaged as mutual funds pay around 0.25 per cent.

We all know that interest rates are low and that high rates are nowhere to be found outside investments that carry a lot of risk. We accept that savings offer bulletproof safety as long as deposit insurance rules are followed, and that the cost of safety is a low return. But slapping the term high interest on accounts paying 0.05 to 0.1 per cent is misleading.

Some banks compound the problem by offering temporary deals for bonus interest at rates that look respectable. But these accounts always revert to the standard rate at some point.

A lot of big bank high interest accounts are legacy products that have been around since the days when rates were a lot higher. A name change would be mildly costly for banks, and counterproductive. The phrase high interest might be just the soothing assurance a busy customer needs to park money in a big bank savings account instead of a competitor that pays more.

Your homework is to check the interest rate on your big bank savings account and then read my Tuesday newsletter. The fifth instalment of the Back to Basics series will look at how to ensure you get a decent rate of return on your savings.

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Q: Is it really true that you need to spend less than you earn to get ahead? What about people who buy real estate they can’t afford to keep and then flip it for a profit?

A: Real estate flipping works for some, but I’ll stick with saving and investing steadily over a lifetime as the more reliable wealth-builder over the long term. House prices will not keep rising at current rates indefinitely. At a certain point, flippers will hit a wall.

Today’s financial tool

An alternative to hard-to-remember online passwords – introducing the passphrase.

Who I’m following on Twitter

David Coletto, CEO of the polling firm Abacus Data. Lots of useful intel on attitudes toward issues of the day, many of them finance-related.

The Money-Free Zone

Writing about saving put me in mind of the great Aimee Mann song Save Me.

In case you missed these Globe and Mail personal finance-related stories

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More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

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