I have been chatting with a friend who asserts that all investments have an associated risk. In reference to this I suggested a High Interest Savings Account, claiming it has no risk. My friend asserts that this is quite different from "no risk."
So I want to ask where does the risk come from in reference to a HISA, or is there even any?
For context, I'm refering to HISA offered by Canadian banks such as CIBC.
There is no fixed definition of "high interest savings account" so you'd need to view the disclosures.
If you are opening an account at a bank and that account is insured by the government (the FDIC or NCUA in the United States) then there is (effectively) no risk of losing your money assuming your account is under the deposit insurance limit (currently $250,000 per depositor per bank per ownership category).
Frequently, banks offer money market accounts that offer better returns but are not FDIC insured. These accounts invest in very safe short term corporate and government bonds so the risk of losing money is very, very low and hasn't happened in history. But it could happen in theory. During the sign-up process, there should be a screen that warns you that you are investing in a non-FDIC insured account but that tends to be a warning that people blow right past.
There are also lots of non-bank entities that offer things called "high interest savings accounts". Some of these partner with actual banks so that your funds are FDIC insured. Some are investment companies that are offering uninsured money market funds that are still incredibly safe. Still others are investing in reasonably safe assets but not completely safe so you could lose money.
What is missing from the other answers is the underlying risk - an insurance is only as good as the insurer, here the Canadian Government.
In other words, the risk of partial or total loss exists, in the case that Canada goes bankrupt. Most people would consider this a negligible small risk (me included), but that's up to you.
Also, a high inflation can eat away the value of the investments. If you invest 1000 CAD, and you get back 1100, that sounds nice, but if the 1100 will only be enough to fill your gas tank, it's not so nice. Again, that risk is probably very small, but not zero.
Typically, in finance, "risk" means "variance of returns" - so an investment with high "risk" can gain or lose significant amounts of value in a time period. There are other types of "risk" including default risk (the risk that the investment won't pay our what it is supposed to), counterparty risk (the risk that the other side of the investment won't pay out), etc.
For a bank account, there is no risk in terms of return variance - you will get whatever interest you are entitled to based on the terms of the account. There might be counterparty risk if the bank is not insured by some agency, but no risk in the investment sense.
That said, high-interest accounts typically have other requirements like balance minimums that make up for some of the "cost" to the bank of paying more interest, but these are not "risks" per se (other than maybe liquidity risks if you can't use all of the funds when you need to).
I believe your friend is just being pedantic. (You could ask to be sure what they had in mind.) Regular savings accounts in Canada (both high and low interest) are CDIC insured. The probability of the Canadian economy collapsing such that CDIC insurance is unable to pay, is so low that, compared to other places you can put your money, effectively there is no risk.
When you talk about risk in general, it makes sense to consider the alternatives. Based on a previous question of yours, I assume your money is currently sitting in a very low interest bank account, also which is CDIC insured. Moving that money into another CDIC insured HISA literally has zero additional risk compared to leaving it where it is now. If one is extremely paranoid about the economy, then perhaps one might think the alternative is keeping it as cash somewhere. Statistically, the risk of cash being lost, stolen, or destroyed is much higher than CDIC failing. Another alternative is crypto, but without a locked in monetary standard it's far too volatile, and likely carries an even higher risk of being lost or stolen, than cash does.
By the way, an interesting statistic regarding CDIC:
Since our creation by Parliament in 1967, CDIC has handled 43 failures, affecting more than 2 million depositors. No one has lost a single dollar that is under CDIC protection.
If it's a true savings account, then it won't have any more risk than any other savings accounts. Not zero, but very low if your country has well-regulated banks.
The higher interest accounts usually have strings attached. For example, you have to give 90 days notice of withdrawals, or you can only open one if you have another account with the same bank.
