Guaranteed Investment Certificates (GIC)

A guaranteed investment certificate (GIC) is a secure, low-risk investment.  A GIC guarantees 100% of your original investment (the principal) plus interest over a set period (the term). When your GIC matures at the end of the specified term, you are guaranteed to receive your full original investment plus interest. The money you put into a GIC, plus the interest, is eligible to be insured by the Canada Deposit Insurance Corporation (CDIC), up to $100,000 per category.

There are many benefits of a GIC, some include: 

• Flexibility in a range of terms and interest rate options
•  A GIC guarantees 100% of your original investment (the principal) plus interest over a set period (the term)
• Safety and protection (Canadian Deposit Insurance Corporation eligible)
• Available to purchase in registered and non-registered accounts. To learn more about which plan is right for you, please visit https://www.scotiabank.com/ca/en/personal/investing/investment-plans-options.html

If you want a safe, stable, low-risk investment, GICs are often considered a good investment. Before investing you need to consider the following:

Access to Your Money

With some GICs, you can't touch your money until the investment term is over. If you might need your funds unexpectedly, you might want to consider a Cashable or Redeemable GIC. A different option, like a high interest savings account where you can access your money easily may also be more suitable.

Risk Tolerance

If your main concern is keeping your money safe while earning some interest, a GIC might be a good fit. But if you're comfortable with taking on more risk for potentially higher returns, especially over a longer period, there are other options to consider. Your Scotiabank advisor can help you figure out what's best for you based on your goals, how long you want to invest, and how much risk you're comfortable with.

Fixed or Variable Rate

Most GICs offer a fixed interest rate for each term so you'll know exactly how much you'll get back at maturity. However, fixed rate GICs might not keep up with inflation because they usually have lower returns.

On the other hand, Market Linked GICs give you returns based on the performance of an equity market index. So, if the index goes up, your returns could be better than with a fixed-rate GIC. If interest rates drop while your money is invested, you benefit from a minimum guaranteed return**. And with both types of GICs, your original investment is guaranteed.

GIC rates vary from one GIC type to another, and vary based on term length. Some GIC rates in Canada even depend on market performance. Check out Scotiabank’s GIC rates here.

Interest earned from a GIC is considered investment income in the year it is earned. However, the income may not be taxable, depending on the type of account you have. If a GIC is in a registered plan like a TFSA, the money it earns won’t be taxed. But if your GIC is held in a non-registered account, your returns will be taxed in the year earned like any other income.

If you’re holding a GIC in a non-registered plan, the interest is subject to tax each year. So, if you have a GIC with a three-year term, the interest you earn each year will be taxed – even if it hasn’t been paid out to you yet. If you hold a GIC in an RRSP, you’ll only pay tax when you withdraw your money out of the RRSP.

A GIC is a type of investment that you can hold in different investment accounts, such as an RRSP, FHSA, RESP, or TFSA.

A TFSA is a registered plan that allows you to hold various investments, and the money you earn from those investments isn't taxed. When you put a GIC into a TFSA, the interest you earn on it is tax-free up to a certain limit.

A GIC is a safe way to invest because no matter what's going on in the market, you'll always get back the money you put in, plus interest.

A High-Interest Savings Account (HISA) usually earns more interest than a regular savings account. The more money you have in your account or the longer you keep it there, the more interest you can earn.

Both GICs and HISAs have their advantages depending on your financial situation. These following questions can help you better determine if you should place your money in a GIC or a HISA.

• How much do I have to invest?

If you have a large sum of money to invest, a GIC will typically offer a higher interest rate, and therefore a higher return. If you want to make continual contributions to your investment, then a HISA might be the best product for you. Plus, you can continue adding to your HISA at any time.

• When will I need this money?

If your financial goals mean that you will need this money in a year or more, a GIC could help you avoid the temptation of dipping into your savings. A GIC can also 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 may be a better account for your savings. Scotiabank's Momentum^PLUS Savings Account allows individuals to save for multiple goals in one account.

Two of the most common investment options in Canada are mutual funds and guaranteed investment certificates (GICs). A GIC is a low-risk, secure investment vehicle where 100% of your principal investment is guaranteed. With a GIC, you can earn interest at a fixed or variable rate over the life of your investment. Mutual funds are investments that pool money from many investors to buy stocks, bonds or other securities. Investing in mutual funds is an easy way to diversify your portfolio by distributing your investment over a range of securities, geographies, sectors, asset classes and more.

Scotiabank’s Market Linked GIC is a unique, no-fee investment product with 100% principal protection like a GIC, and market linked growth potential of a mutual fund. Unlike a traditional GIC, a Market Linked GIC is tied to a particular equity market index—like the S&P/TSX 60 Index or the S&P 500 Index.

Cashable and Redeemable GICs combine the guarantees of traditional GICs with the flexibility to access your money prior to maturity, if needed. With a Cashable GIC you get a guaranteed competitive rate of return for the time you remain invested. For Redeemable GICs, you can access your funds at prescribed early cashing rates. Learn more about Scotiabank GIC rates.