Guaranteed Investment Certificates (GICs) are typically one to five year deposits with a bank, trust or other financial institution.
Your GIC is issued in your name and can't be sold except to the institution that you purchased them from. The contract states that you agree to keep the money in the GIC for the period specified in return for a "guaranteed" rate of interest. Some GICs, called "Compound" GICs will pay you interest on your interest as it accumulates—the interest is added to your original deposit instead of paying the interest to you outside the GIC. This means you'll get more money in subsequent interest periods as your principle grows.
In the event you need to refund the GIC and get your money before the end of the GICs term, you will most often be penalized—you will receive less interest on your money than was initially agreed because the contract has not been adhered to.
GICs are one of the safest investments if you can afford to have your money tied up for the time period, as previously mentioned, if you withdraw your funds before the GIC matures you will lose some of the interest gained. You could also miss the opportunity to invest at a higher rate if interest rates rise while your money is locked in so consider the term of your investment carefully if interest rates are fluctuating.
Guaranteed Investment Certificates usually pay higher rates of interest than savings accounts, but less than many other kinds of investments. Rates are higher for longer term GICs and for larger deposits.
If you would like to learn more about Guaranteed Investment Certificates or discuss how they might fit your financial plans, please contact me for a no-obligation consultation. |
