Breaking down GICs – what are they, and are they right for you?

If I were to write you all of the information I knew about GICs before partnering with Servus Credit Union, well this article would already be over. So, I met up with our advisor Brock and told him to explain GICs to me like I was five.

In the simplest of simple terms, GICs are like a savings account that you can’t touch for a determined amount of time.

In more complex terms, GICs – a Guaranteed Investment Certificate – are issued by banks or credit unions and work much like a savings account with interest rates that are slightly higher. The main difference from a savings account is that you can’t touch it for a set amount of time, usually 1-5 years. You can have GICs in your RRSP and/or your TFSA and your rate of return is certain. GIC rates are typically higher than a savings account, but lower than most investment accounts, but it is their conservativeness that makes them especially inviting for people that are risk-averse with their investments, or for people in specific life situations.

For example, their stability and the difficulty in touching the money makes them a good vehicle for saving for a large life event such as a wedding, first child or major trip. It’s especially effective if you’re the type of person that sees a large number in your bank account and suddenly it’s burning a hole in your metaphorical pocket.

GICs can also be a good choice for retirees who don’t need all of their retirement funds all at once (nor should you liquidate all of your assets at once).

One thing to keep in mind with GICs is they are tough to access in the event of an emergency. Most institutions will penalize you for taking your money out early, so if you’re investing in GICs it’s important that you also have an emergency fund you can access in the event you need to.

Photo by Angus McKenzie Photography

Stock Market GICs

Stock market GICs can be a great product to add to your retirement plan as they offer growth potential without the risk. If the market goes up, your money grows. If the market goes down, your original investment is safe and guaranteed.

Stock market GICs can be held in an RRSP or a TFSA to diversify your portfolio and they combine the security of a GIC with the enhanced return potential of stock market investments.

They’re also eligible for the Servus Big Share Contest!

With the Servus Big Share, every time you save $500 you get an entry to win $1 million. So not only are you saving to help your family’s future, but you could be setting yourself up for life!

Click here to find out more info about the Servus Big Share and how you can enter.