1. Select the best amount and term for you
First things first, figure out exactly how much money you have to invest and for how long. Do you need access to the money while it’s invested, or are you happy for it to be tied up? This step can be tough because you never know when an emergency could strike and you’ll need quick access to your savings. The best you can do is plan for the most likely scenario. Consider breaking down your investment into different pots; for example, if you have $5,000, you may be happy to you have $2,500 tied up in a non-redeemable GIC for 3 years and the rest in a redeemable GIC for the same period, so you can gain access to it.
2. Lock it in
The GICs that lock in your money will typically pay a higher interest rate, but this also means that if you need to access your investment before the term expires you may have to pay a penalty.
3. Compare rates
Companies offer different interest rates for their GIC products, so make sure you compare the market to find the best GIC rates. Don’t just stick with your existing bank.
4. Compare like for like
Some GICs have different minimum deposits, while others are eligible for RSPs or can be redeemed at any time. Make sure you compare GIC rates for the same product. A GIC with a minimum deposit of $100,000 that you need to lock in for 5 years, is going to carry a higher interest rate then a cashable GIC with a $1 min deposit.
5. Speak to a professional
The internet can be a very useful tool when researching a product like GICs. But it’s also a good idea to get advice direct from an expert. By speaking with a registered deposit broker, you’ll get advice for your personal situation and access to the most competitive rates. Brokers typically work with a number of institutions so they can tell you who's offering the best rate. And best of all, it's free! Most brokers won’t charge for their services - they are paid by the financial institution when you purchase a GIC through them. To arrange for a call back from a GIC broker, call toll free 1-866-447-9027.
6. Stay on top of rate changes
GIC interest rates can fluctuate greatly over a period of a few months. Although it’s difficult to ‘time the market’, you want to try to get in when rates are highest. Speak to an expert about when to invest or try buying GICs in smaller amounts, at different times.
7. Don’t stop at one GIC
Top up your savings throughout the year by making additional contributions. Look into arranging an automatic debit from your account each month that can be put towards buying GICs.
8. Make your money work even harder
If you buy a registered GIC, this can be included in your Registered Retirement Savings Plan (RRSP), or a RESP (Registered Education Savings Plan) and you won’t pay tax on what you make until you withdraw money from the plan. Enjoy the benefit of tax-deferred growth.
9. Consider a laddering GIC strategy
This strategy gives you the taste of both worlds - fixed income in the short term (one year), plus the higher interest rates of a long term GIC. Start by dividing the amount you have to invest into five equal parts. Then invest that money into five GICs with terms of one, two, three, four and five years. Every year, when your GIC matures, reinvest in a five-year GIC. Soon, you will only have five-year term GICs maturing every year, giving you regular liquidity and decent interest rates.
10. Make sure you’re covered
The Canadian Deposit Insurance Corporation (CDIC) will insure up to $100,000 of your deposits made with member financial institutions in case of their failure. Click here for a list of CDIC members. Just remember that the maximum is $100,000 with one CDIC member, so if you’re investing more than that in GICs, consider going with multiple companies our putting part of the investment in your spouse’s name.