Ask MoneySense
I’m undecided. I currently have a promotional rate of 5.25% and I’m about to open a Tangerine account to take advantage of a 6% promotional rate.
Many people suggest investing this money in the stock market for higher long‑term returns. But a guaranteed return with no apparent downside and monthly interest payments feels very attractive compared with ETFs or other market investments. I’m torn.
I do have other investments, but they represent less than 10% of my overall assets.
Am I being overly conservative?
— Grace (name changed)
Are high interest rates better than stocks?
Leaving $100,000 in a high‑interest savings account (HISA) can be a perfectly reasonable choice. This is your money and your future: the decision should reflect your risk tolerance, goals, timeline and comfort level. Financial choices combine emotions, knowledge, product features and personal ambition, so there isn’t a one‑size‑fits‑all answer.
Savings versus Treasury bills and guaranteed returns
To compare options, it helps to consider historical, inflation‑adjusted returns for equities and short‑term government paper. Currently, short‑term Canadian T‑Bill yields are close to promotional HISA rates, but HISAs and T‑Bills differ in tax treatment, liquidity and guaranteed nominal value.
Get up to 3.00% interest on your savings without fees.
Lock in a guaranteed rate for one year.
Short promotional term savings with elevated interest on eligible deposits up to $100,000.
MoneySense is an established personal finance magazine that has helped Canadians manage money since 1999. Our editorial team of trained journalists works with independent finance experts to compare products from major banks, credit unions and issuers. We aim to provide clear, evidence‑based guidance so readers can make informed choices.
Historical inflation‑adjusted returns (2003–2022)
All figures are in Canadian dollars and adjusted for inflation.
| 1 year | 5 years | 10 years | 20 years | |
|---|---|---|---|---|
| S&P 500 | -17.4% | 7.7% | 13.4% | 6.7% |
| TSX | -11.4% | 3.5% | 5.2% | 6.2% |
| 30 Day T‑Bill | -4.4% | -2.1% | -1.4% | -0.6% |
| Inflation | 6.3% | 3.2% | 2.4% | 2.1% |
Building a portfolio
The primary reason to invest in equities is to outpace inflation and preserve purchasing power over the long term. If asset growth matches or exceeds inflation, you maintain the ability to buy the same goods and services in future years with inflation‑adjusted dollars.
The table above shows that over 5‑, 10‑ and 20‑year horizons, both the S&P 500 and the TSX delivered positive inflation‑adjusted returns. Yet equities also showed a substantial negative return in 2022, which illustrates the volatility and downside risk that makes many savers uneasy.
By contrast, short‑term instruments such as T‑Bills and many HISAs typically keep your principal intact; you are unlikely to see the dollar amount fall. However, while nominal capital is preserved, inflation can erode purchasing power if interest does not keep up with rising prices. That is a different but important form of risk.
Risks with interest income and the role of inflation
Holding T‑Bills, HISAs or short‑term GICs carries low nominal risk to principal, but they may deliver returns that lag inflation—especially after taxes. If preserving real purchasing power is your priority over many years, low‑yield cash instruments may not be sufficient.
There are sensible reasons to use savings vehicles, though. They are well suited to short‑term goals, smoothing the transition from accumulation to retirement, or preserving capital when you anticipate spending soon. Their liquidity and predictability make them valuable parts of a diversified plan.
Another practical reason to hold savings rather than equities is timing uncertainty: you can’t know in advance when equities will perform well. Historically there have been multi‑year stretches when short‑term government yields outperformed equities; past performance isn’t a guarantee, but it shows that equities don’t always win every time period.
How often do equities beat T‑Bills?
Using historical rolling periods from June 1973 to December 2022, Canadian equities (S&P/TSX Composite) outperformed 30‑day T‑Bills in most, but not all, overlapping periods. The frequency increases with longer horizons:
| Term | Percentage of time equities beat T‑Bills |
|---|---|
| 10 years | 89% |
| 5 years | 73% |
| 1 year | 63% |
Should you save or invest?
Grace, even over a 10‑year horizon there’s roughly an 11% chance, historically, that a HISA or T‑Bill would have outperformed equities (before taxes). The shorter your planned time frame, the greater the chance cash‑like instruments outperform equities in that window.
Both HISAs and equity investments carry distinct risks: cash instruments face inflation and tax‑related erosion of real returns; equities face market volatility and possible drawdowns. The right choice depends on your objectives, time horizon, liquidity needs and psychological comfort with market swings.
If your priority is capital preservation and predictable monthly interest, keeping the money in a promotional HISA may be entirely sensible. If your priority is long‑term growth to outpace inflation, you should consider increasing exposure to equities or diversified investment funds. Many investors find a middle path—keeping an emergency fund and short‑term savings in high‑interest accounts while investing a portion of excess capital for longer horizons.
Ultimately, choose the option you can live with. If friends, family or advisors advocate a different route, weigh their advice against your goals and the level of risk you are comfortable accepting.
Read more about what to do with $100,000
- How safe is it to keep more than $100,000 in one savings account?
- TFSA, RRSP or pay off the mortgage? What to do with $100,000
- Planning for retirement with little or no savings to draw on
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