the low risk and guaranteed return matter to you." width="1120" height="465" />the low risk and guaranteed return matter to you." width="1120" height="465" />
With interest rates more elevated than years past, GICs provide the ability to earn a decent return over a relatively short period of time — one to five years — without the risk of losing money.
Here’s what to know about how GICs work, what to consider before buying a GIC, and how to decide if GICs are the right investment option for you.
Lock in 4.30% on a 1-year GIC with EQ Bank, one of our picks for the best 1-year GICs.
A GIC is a guaranteed investment certificate. They’re considered one of the safest investment options for Canadians because returns are guaranteed, so there is minimal risk involved.
A GIC works similarly to a high-interest savings account, except that your money is locked in to grow for a predetermined period of time. When the investment matures, or reaches the end of that time period, you get your money back plus the agreed-upon amount of interest.
As long as you let your GIC mature, you are guaranteed that money. However, if you withdraw the funds earlier than the contract allows, you will be penalized and may lose some or all of the interest.
Nerdy Tip: Some GICs are cashable or redeemable, but they typically come with a lower interest rate. Also, if you do need to withdraw your funds, you could end up paying a penalty.
GICs are a great option for a few different circumstances. Here’s when investing in a GIC may be beneficial to you.
If interest rates are rising. The Bank of Canada increased the policy interest rate three times so far in 2023, in an effort to curb inflation. While rising rates make it more expensive to borrow money, they also make it more lucrative to save money via products like high-interest savings accounts and GICs.
If you struggle to save. If you have trouble tucking money away in a savings account you can access, a GIC could be helpful. Since most GICs have penalties for early withdrawal, investing in one removes the temptation to withdraw the money for an impulse purchase.
If you’re saving for a specific short-term goal. If you’re planning a dream vacation, a wedding or even a major home renovation in the next few months or years, putting your savings in a GIC is an easy way to keep that money safe and also earn a bit of interest.
If you’re retired and will need access to the money soon. GICs are much less volatile than the stock market. If you won’t have time to let a market-based investment bounce back from any potential downturns, a GIC is a lower-risk option.
If you want a balanced portfolio. GICs are considered fixed-income investments, which can help reduce risk and volatility in your investment portfolio.
If you’re intimidated by the stock market. Some people are nervous about the volatility of the stock market and choose not to invest at all. But simply holding onto cash means they miss out on growth opportunities. In this case, a GIC is a great option for investing beginners. It’s guaranteed, so your money is safe, and the interest rates are often better than those offered by high-interest savings accounts.
If you want to teach kids about investing. If you are helping your children learn about money and financing, having them put their savings into a GIC can be a great start to exploring how to invest.
Compare all different GIC rates side-by-side and find out the best rate that will meet your need
