There is a common misconception that GICs are only for seniors, but this couldn’t be further from the truth. The reality is that guaranteed investment certificates can help you achieve a wide range of financial goals. Keep reading to discover 4 times a GIC might be a wise investment.
1. You are saving up for a wedding, car, or other major purchase
If you have a major expense in your future, such as a wedding, new car, or round-the-world vacation, chances are you’ve started saving. And while putting that hard-earned money in a high-interest savings account might seem like a wise choice, investing it in a GIC may be an even smarter move. GICs are a great money-saving tool, especially for short-term savings goals. So if your wedding day is a year or even months away, consider investing in a short-term GIC. This will allow you to grow your savings without risk. Plus, the money will be tucked away somewhere safe where you won’t be tempted to spend it.
2. Your child is going off to university soon
There’s no denying that GIC investments offer modest returns. Therefore, we understand why a GIC may not have made sense back when you first started a college fund. But with nearly decades’ worth of time growing your child’s college fund in the stock market, it might finally be time to consider investing it in a GIC. Why? Because your kid might only be a year or two away from university, making now the time to invest in something low-risk. You can even invest in a GIC through your RESP. Avoid losing any money you’ve saved by choosing a GIC.
3. The stock market is stressing you out
If the ups and downs of the stock market are stressing you out, it might be time to consider a low-risk investment option. GICs are just that – they are incredibly low-risk, especially if you choose to invest in a fixed-rate GIC where a return on your principal is guaranteed. GICs typically offer better interest rates than savings accounts while still allowing you to invest in something worthwhile. For conservative investors fed up with stocks, a GIC might be perfect for you.
4. You want cash available to invest in the stock market
One final situation in which purchasing a GIC might be worthwhile is if you want cash available to invest in the stock market. Savvy investors choose cashable or redeemable GICs so they can always have cash on hand if the market takes a turn. With cashable and redeemable GICs, you get the best of both worlds – flexibility and a low-risk investment (though they often come with lower interest rates). Rather than leaving your money in a savings account, earn a better interest rate in a GIC. Then, when an opportunity comes along, cash out your GIC and invest that money in the stock market. Keep in mind that most cashable GICs have initial locked-in periods of 30 to 90 days, so only purchase a cashable GIC if you’re prepared to leave your money for one to three months. Alternatively, redeemable GICs usually do not have locked-in periods, allowing you to withdraw your investment anytime.