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Canadian Savings Accounts – Some Tips

The Toronto Star recently ran a column on Canadian bank savings accounts. While the column is not complete in terms of defining which account offers the best return, it is a handy tool.
Here is the summary of the article.
It’s tough to find a good interest rate on your savings these days.
The big banks pay next-to-nothing for their basic savings accounts – between 1.2 and 1.5 per cent –  so unless you carry a big balance you’re better off parking your savings with an online bank or credit union.  Even then, you’re not keeping up with inflation.
Ally and ING Direct, two of the more competitive banks for savings, recently lowered the interest paid on their high interest savings accounts to less than 2 per cent. With the national inflation rate at 1.9 per cent in April and 3.1 per cent in Ontario, you’re treading water at best.
So what’s a saver to do in an environment that punishes saving? You might consider a GIC if you’re looking to boost returns.  Forget about one-year GIC terms though; they’re paying about the same as a high interest savings account, so you’ll need to lock in for five years just to get a measly 3 per cent rate.
You might also consider buying shares of Canadian banks, utilities and telecom companies, whose dividend yields are between 3.5 per cent and 5.5 per cent. You also get a tax break, but beware. Those yields come with extra risk. Stocks rise and fall and dividends can be suspended.
High interest savings accounts offer more advantages over GICs because the interest rates are just as competitive and you have the flexibility to move money in-and-out of your account as you see fit.
This chart looks at the best savings account rates offered at the big five Canadian banks and several popular online banks:
For the Chart and more, visit Bank savings accounts: Whose is best?
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