5 Things to Know about GICs

Are you someone who looks at the stock market and recoils in fear?  Do you want to get the most bang for your buck but don’t want to risk losing anything in the process? Are you saving for a shorter-term goal? If this sounds like you, a GIC (or term deposit) might be the right investment for you.

Keep reading to learn more about how you can save your money with less risk. 

1. What is a GIC?
A GIC, or Guaranteed Investment Certificate, is essentially an investment that earns a higher rate of interest than a standard savings account. It’s also 100 percent guaranteed through the Credit Union Deposit Guarantee Corporation* (CUDGC), unlike at other banks where you’re only guaranteed up to a certain amount. 

Unlike when you invest in things like stocks or mutual funds, there is little to no risk with a regular GIC. You’ll get back the money that you invested, and you’ll be able to grow it too. 

2. What types of GICs are there?
There are two main types of GICs—retail GICs and market-linked. Each can be redeemable and non-redeemable. We know, it’s getting complicated. But stay with us here.

Retail vs Market-linked GICs:
  • Retail GICs are separate from the market and are used to keep your money safe and secure. On the other hand, market-linked GICs are for members who are looking for a potentially higher rate of return on their money, are open to slightly more risk, but still want the security of a GIC.
  • Market-linked GICs allow money to be invested into the market without the risk of losing your initial investment. If the investment goes up in value, you get a great rate of return, which means more money in your savings. If not, you still keep the money you invested originally.

Redeemable vs Non-Redeemable:
  • No matter which type you choose, a redeemable GIC means that you have complete flexibility and control over your money. You can access the money when you need it without any penalties.
  • When it comes to a non-redeemable GIC, your funds are locked away for the entire term, which can be between 12 and 60 months.

However, at connectFirst we understand that life happens, and that’s why we offer what we call a “classic withdrawal” on ALL retail non-redeemable GICs. This means that within 12 months of their term starting, members can withdraw a maximum of 20 percent of their funds. So you can still access that money if you need it.

3. ​Who should invest in GICs?
GICs are a great investment option for any member. If you want to grow your savings without the risk of investing, this is a great option for you. And if you’re already investing (go, you!), it’s a great compliment to your portfolio. Meeting with a connectFirst financial advisor is the best way to understand how GICs can help you achieve your goals. 

We’ll ask you about what you’re saving for and what other savings or investments you already have to better understand your situation.

4. ​​What can I save for with a GIC?​​​
Depending on your term length and financial situation, you can use a GIC to save for many different life situations. 

Shorter-term, redeemable GICs can help you save for a specific goal, like a house, a car, a wedding or a vacation. These are life events that might be coming up soon, so you’ll need the money to be easily redeemable.

On the other hand, you might use a longer-term, non-redeemable GIC to save for retirement. Putting some money away in a GIC will keep your funds safe and secure while also giving you the benefit of growing your savings by earning interest. 

5. Why are GICs a particularly good investment option right now? ​​​
You might have heard that now is the time to save—and that’s because higher interest rates mean that your money will grow faster.

In 2020, interest rates were pretty low—a five-year, non-redeemable GIC would have likely only earned 0.5 to one percent interest. Now, interest rates are sitting between four and 4.5 percent for 12-24 months. That’s a pretty big difference, particularly when you take compounding annual interest into account. (Get it? Account? Like... your bank account? We’ll see ourselves out.).

And, since your principal investment in a GIC is fully guaranteed*, you don’t have to worry about stock market changes.

Connect with us.
​​Book an appointment with your connectFirst financial advisor today and start saving. ​

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*All principal and interest is 100% guaranteed by the Credit Union Deposit Guarantee Corporation, excluding common shares, investment shares, and mutual funds.
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