It’s tough to be saver when the interest paid on savings accounts isn’t keeping up with inflation. Even some of the more competitive banks for savings – Ally and ING Direct – have recently lowered the interest paid on their high interest savings accounts to less than 2 per cent.
While it’s tempting to look for higher returns, a savings cushion is important and at the end of the day, a savings account gives you a safe place to store your money.
Related: Bank savings accounts – Whose is best?
I asked ING Canada president Peter Aceto what factors influence INGs savings account interest rates and whether or not rising rates will give savers a chance to beat inflation.
He said that interest rates have been at historically low levels for a few years, so it’s difficult to guess how much savings account interest rates will exceed inflation, if at all.
Even when rates were in the double digits, savers were still treading water because inflation was just as high. So when you consider the real return on your money - the interest rate on your savings minus inflation - there's no reason to believe that things will get better for savers when the Bank of Canada eventually raises its key interest rate.
Aceto said that economic conditions are still largely uncertain and perhaps make it more difficult to put money away, but changing everyday habits can go a long way to getting Canadians closer to long-term savings goals, like paying down debt and saving for retirement.
There are still compelling reasons for Canadians to save, despite this low interest rate environment.
A savings account is still a great option for those looking for a simple and safe way to put money aside. Whether you’re looking to build an emergency fund, save up for a vacation, or set aside money for a down payment, a savings account is a necessity.