Is a High-Interest Savings Account Worth It, Again?

Much ado has been made over the recently advertised Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) high-interest savings account which is slated to allow savers to earn up to 1.6% on their deposits at one of Canada’s largest banks, a redesigned savings account which stands alone as one of the first “true” high-interest savings account available to Canadian savers unwilling to put their hard-earned savings into higher-risk options such as the stock market.

High-interest savings accounts for some time have delivered pretty paltry returns for investors (often at a 1% yield or lower), forcing savers looking for moderate appreciation toward equities or bonds.

Whether this new 0.7%-per-year savings account (plus an additional 0.75%-0.9% yield depending on deposit length) will change the savings habits of investors remains to be seen, however, having an option to safely have cash sitting on the sidelines, available to take advantage of the next bear market, may not be a bad thing.

Building up cash reserves in today’s investing environment is certainly a prudent thing to do, as evidenced by the actions of some of the world’s greatest investors.

Having cash available to put to work should the market shed some of its gains in the coming years requires having said liquidity available to be used at any given time. In that regard, the 1.6% savings account may not provide the sort of cash reserves investors are looking for, as the increased rate is only available to savers willing to lock their savings away for up to a year.

Invest Wisely, my friends.