What is a GIC?

GICs offer varying terms. GIC terms can be as little as 30 days or as long as 10 years. The institution where you buy your GIC can pay you interest on a monthly, semi-annual, or annual basis or reinvest the interest on your behalf until the maturity date.

Non-redeemable GICs will not allow you to access your funds until the end of the term. If you think you will need the cash, look for a cashable or redeemable GIC. Cashable GICs often have a one-year term and can be cashed at any time after a short waiting period of 60-90 days without penalty. Redeemable GICs are often held for longer than one year and can be cashed at any time, although there is often an early redemption fee.

GICs also come in various forms, including fixed income investments and others tied to the stock market.

GICs are excellent low-risk investments. They make sense for people with shorter investment horizons and those who cannot afford to risk their principal. That’s why they are generally good choices for registered accounts such as RESPs and RRSPs, particularly if people will soon need these funds for significant events or purchases such as weddings, trips, automobiles, or even appliances. Or to send a child to school or retire.

GICs are also great to help save money for a long or short-term goal. Unlike savings accounts, GIC rates are guaranteed, and there are incentives to leave your money in the GIC. In theory, you are more likely to keep saving.

You can buy GICs in person, by phone, or online, directly through most financial institutions, including banks and trust companies. Independent deposit brokers or online discount brokerages also sell GICs. You will need to set up an account, sign forms and arrange a deposit to pay for the GIC.

Rates for GICs vary widely depending on the seller and the terms. Cashable or redeemable GICs tend to have lower rates than non-redeemable GICs. Longer terms or escalating GICs offer higher rates than short-term GICs. Credit unions often provide some of the best rates, but many of those are not covered by CIDC insurance. Be sure to ask about terms & conditions as well as insurance.

Here is a short list of some of the best registered, CDIC insured GIC rates in Canada:

Take time to compare rates and terms before you buy. Understand your own needs first. What are you saving for, and when are you likely going to need access to the cash? Can you foresee any emergencies where you may need the money sooner? These questions can help you determine the term and type of GIC you buy and get you the best return on your investment while still ensuring your money is available to you when you need it.

GICs are safe, secure investments that allow you to earn a competitive rate of return on your investment. Investing in other securities can offer a much higher rate of return. However, GICs are still an excellent choice for risk-averse investors and short-term investors or those seeking to balance risk in their investment portfolios.