The highest in Canada that I've found is 2.8% interest, compounded annually where the interest is calculated daily. I have $2000, and the initial amount and the interest earned is guaranteed by a governing body.

Though, I spoke to some people and they suggested since I don't have much, ~10K in total, the interest earned on a 2000k deposit won't be that much to begin with.

I know that growth is not linear, but will a small amount really matter? Should I put in the 2K or wait a bit and put in more when I have more? I'm 22.

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    If you don't put the money in the 2.8% account, where is the money currently deposited? – mhoran_psprep Apr 30 '15 at 14:04
  • 0.8% "high interest" savings with a bigger bank. – user2738698 Apr 30 '15 at 14:17
  • So your question is whether to put your money into one savings account or another? You earn over three times as much in the higher interest one, is there any reason you want to give up earnings? – David Rice Apr 30 '15 at 14:36
  • Just wondering if maybe I should earn more money first, then put in more than 2K at a later time. – user2738698 Apr 30 '15 at 14:43
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    You can put it in the 2.8% account, just make sure you read the fine print. Namely, they don't charge 'administrative/maintenance' fees and also it MUST be insured by CDIC. – Victor123 Apr 30 '15 at 15:34

All aspects of the savings accounts being equal other than the one having a drastically better interest rate, go with the higher interest rate. As to "earning more" before you deposit, you will earn more by making the higher interest rate deposit. If you are putting away savings it doesn't matter if you have $10 or $10,000 put away what you have as soon as you can so it can work for you. Waiting gains you nothing.

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  • +1 "Waiting gains you nothing" is what I was looking for; thanks! – user2738698 Apr 30 '15 at 15:02
  • The sole reason to not do that is if the cost of doing this (gas, whatever) does not generate more than the after-tax difference. If you're in a 35% bracket then the after-tax difference is $26. per year. That will buy 16 medium coffees at Tim Hortons, so it's worth hanging onto if there are no other real costs. – Spehro Pefhany Apr 30 '15 at 15:19
  • @SpehroPefhany So... I just have to make sure at the end of each year, I'm profiting and not losing? I'm not sure what you mean by the after-tax difference. – user2738698 Apr 30 '15 at 16:29
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    You will have to pay income tax on the interest income (you'll get a T5 and it will be reported to the CRA by the financial institution). You may have associated expenses that are paid with after-tax money. It doesn't make much difference if your income is very low, but if you're making much money (especially in Canada) you're left with maybe half the money after paying taxes. – Spehro Pefhany Apr 30 '15 at 18:01

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