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Using GICs to supplement your savings


Scott Boyd

October 15, 2015

Using GICs to save for specific goals

Saving for a long-term objective requires you to balance the protection of the principal, with the ability to still generate an acceptable return rate. As noted last week, GICs offer safety together with guaranteed returns making them ideal for helping you save for a future goal such as your retirement.

GICs with longer terms usually offer higher yields, so when saving for something that is several years in the future, you can take advantage of the yields that come with long-term GICs.

However, GICs are still flexible enough to serve for shorter-term savings objectives as well. You can invest in GICs in varying lengths of time so you can always find a maturity date that suits your needs, while still guaranteeing the safety of your investment.


Supplementing government savings plans with GICs

Registered savings plans including TFSAs and RSPs offer savers several advantages. You can hold a wide range of investment types within these plans including GICs, but there is a maximum amount you can invest in these plans each year.

For those with funds to invest exceeding their annual limit, GICs provide an excellent way to safeguard this money for future use. With the principal and interest guaranteed against loss, and with the backing of the Canadian Deposit Insurance Corporation (CDIC) insuring your funds, GICs will protect your funds while still earning interest.


GICs as an alternative to a savings account

Savers are painfully aware that the standard bank-sponsored savings account offers very little in the way of yields. But to be fair, these accounts are not intended as a long-term investment vehicle; they are designed to provide a safe means of storing funds that you can access at any time.

However, with the range of options many financial institutions now offer as part of their GIC lineup, it’s possible to invest in GICs that are nearly as flexible as a demand savings account in terms of accessing your cash, while still offering a better rate of return than most straight savings accounts.

For instance, you can invest in GICs that mature in as little as 30 days, or even a cashable GIC that you can redeem any time after either a 30- or 90-day closed period. You do receive a lower interest payment when investing in short-term GICs, but even so, you can count on a higher return than simply leaving the cash in a savings account.

Hopefully, reading this has helped you understand the potential for using GICs to accomplish specific savings goals. In the next part, we will introduce some common GIC investing strategies that are designed to maximize returns and make the most of your GIC investment.


This post is intended for informational purposes only. It is not an inducement to purchase securities and is not to be considered financial advice. Always do your research before making any investment decisions.

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Scott Boyd - Author bio

Scott has been writing about the Canadian financial markets for over 25 years. His insights have been published in a number of leading publications including the New York Times, CNN Money, and the Huffington Post. Scott currently serves as the Contributing Editor for the Oaken Blog.