Prioritizing savings is essential for meeting your short and long-term financial goals. Take the time to consider what your financial needs are for today as well as a few years down the road before you decide which investment strategy lines up with your lifestyle and risk tolerance. Two popular saving options are Guaranteed Investment Certificates (GICs) and High-Interest Savings Accounts (HISAs).

GIC vs. HISA: What are they?

A GIC is one of the safest investment options available because your deposit (a.k.a. principal investment) is always guaranteed, no matter what happens in the market. For example, if you invest $5,000 into a GIC which returns are linked to the performance of a market index and the market does not perform well,, your $5,000 principal investment is still available to you. GICs usually require a minimum deposit between $500 and $1,000, as well as a time commitment where you don't touch your money unless it’s redeemable before maturity. There are a wide range of GICs available generally ranging in 30 days to six years. There are different types of GICs, like traditional GICs with a fixed interest rate and Market-Linked GICs that give you the potential to earn a higher rate depending on the performance of underlying shares or index.

Check out our guide to understanding GICs.

High-Interest Savings Account (HISA) usually earns more than a typical savings account. How much interest you earn depends on the financial institution, but typically, the higher your balance or the longer you keep your money in the account, the more interest you can earn.

If you are wondering how to choose between a HISA and a GIC, you aren't alone. Both GIC and HISA have distinct advantages depending on your unique financial situation. These following questions can help you better determine if you should place your money in a GIC or HISA.

How much do I have to invest?

If you have a large sum of money to invest, a GIC will usually help you see the best interest rates. This is only true if you don't need access to your cash for at least a month or longer. Even if you don't think you need access to your money for a long period of time, it is wise to ladder your GICs so that not all of your investment is tied up in one account. Laddering your GICs is as simple as dividing your investment and start a GIC account with different terms so that they mature at different time intervals – for example, after one year, two years, etc.

If you want to make continual contributions to your investment, then a HISA might be the right move for you. You can continually add to your savings throughout the month. Many High-Interest Savings Accounts allow customers to earn interest on all your balances, which is a great option if you don't meet a GIC minimum deposit requirement.

Want to get on top of your investment and savings planning? 

When will I need this money?

Take a look at your savings goals and timeline. If your financial goals mean that you will need this money in a year or more, a GIC could be the right move to help you avoid the temptation of dipping into your savings. A GIC can help you earn more interest on your savings goals, such as saving a down-payment on a home or buying a new vehicle.

If your goals are more short-term, a HISA will be a better account for your savings. Scotiabank's MomentumPLUS Savings Account allows individuals to save for multiple goals in one account. You can save for your dream vacation alongside your emergency fund and wedding fund all in one account.

Setting any of your savings aside for a premium period allows your money to earn even more interest for a time increment of 90, 180, 270, or 360 days. Unlike a GIC though, your money is not locked away. If you need to access your savings, you can do so with a free transfer. You will only earn regular interest on this account, but there are no fees or penalties for cashing out.

Lump sum or regular contribution?

The advantages of the GIC are that your investment is safe and your principal amount is guaranteed no matter how the market fluctuates. One of the things to consider about a GIC is that once you set up the account, you cannot keep adding to your savings periodically. It is the pressure cooker of savings and once it is locked in, it is best not touched until the maturity date. You can always open another GIC once you have saved the minimum deposit needed.

With your HISA, you can start your savings account and continually add funds. Each dollar you add to your account will begin earning interest. Many HISA accounts will even allow you to set up automatic weekly contributions, which can help your savings grow painlessly.

Set up pre-authorized contributions today to kickstart your savings

A High-Interest Savings Account is a good choice for individuals who are saving more gradually for their financial goals. It might feel challenging to save a lump sum of $10,000 for a new vehicle within a year, but if you set up your bank account to deposit $193 into a HISA each week, you will reach your goal before the year is over.

Choice of return?

How much money are you hoping to earn on your investment? Research the interest rates for different GIC terms and HISAs. Comparing different GIC and HISA offerings will also allow you to choose how often you are paid interest. Some accounts will pay out interest monthly, while others payout interest at the time of maturity. If you want instant access to interest earned, the monthly payouts might suit your financial needs better.

How important is access to my money?

Life can be unpredictable, so it is always wise not to tie up your money in one place. Ideally, the best long-term savings strategy would be to use multiple GICs and a HISA account together. However, if you are just starting your savings journey, a HISA is a good place to start.

Use a HISA to build up your savings without losing access to your money in the case of an emergency. Once you have saved $500-1,000 that you can comfortably live without, even in the case of a pricy financial emergency, then consider opening a GIC.

Though GICs and HISAs work differently, both are wonderful tools to help you build your savings and reach your financial goals.

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