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How do I choose between a HISA and a GIC?


Are you ready to get serious about saving money? If so, it’s time to consider your savings options. For many people, this begins with a High Interest Savings Account (HISA) or a Guaranteed Investment Certificate (GIC). In both cases, deposits up to $100,000 per Member are covered by Deposit Insurance Corporation of Ontario (DICO). And both HISAs and GICs can be held as non-registered investments, or within a registered account such as an RRSP or a TFSA.

If you’re having a tough time choosing between investing in a HISA and a GIC, ask yourself these five questions to help make the best choice.

1. How important is access to my money?

When trying to choose between a HISA and a GIC, think carefully about when you may need to withdraw your savings. With a non-registered HISA, such as our Good to Grow High Interest Savings Account, accessing some (or all) of your savings may be as easy as making a withdrawal at your local ATM, or transferring money online from your HISA to your chequing account. Plus you can withdraw any amount.

With a GIC, accessing your funds means waiting until the GIC matures and funds get deposited to your bank account (more on that in #2 below). And depending on where you do your banking, you may have to talk to a customer service rep or personal banker to withdraw from your GIC.

2. When will I need this money?

If you know you absolutely won’t need to use this money for a set time frame, a GIC may be a better option for you. By choosing a longer term GIC, you could get a better rate than what’s offered on a HISA. However in most cases, you won’t be able to withdraw funds until your GIC matures. This depends on the GIC’s term, which can range from 30 days to five years. This can be a good option for longer term financial goals with a set target date, such as saving to buy a home three years from now.

However if you suspect you may need your savings prior to your target date, a HISA could be a better option for some or all of your savings.

3. Lump Sum or Regular Contribution?

Have you already accumulated a lump sum of savings that you’re ready to invest for three years or more? If you want to get the best rate on a long-term investment with money you’ve already saved, a GIC is probably your best bet. However if you’re planning to add to your savings with regular weekly, bi-weekly or monthly contributions, a HISA may be a more flexible option - because you can’t add money to a GIC once it has been opened.

4. Choice of Return?

Although HISAs and GICs both offer competitive rates and guaranteed security of your principal (your initial investment), GICs offer more flexibility in terms of investment earnings. A HISA earns interest at a fixed rate (subject to change), yet the different types of GICs offer different ways to maximize your investment earning potential.

Escalator GICs (3 or 5 year options) offer increased fixed rates in each year of the term and are cashable every year without penalty. The return on index-linked GICs depends on the performance of the stock market index the GIC follows, giving investors the potential for higher earning.

5. How Much Do I Have to Invest?

The minimum investment for GICs at many financial institutions is $1000, though at Meridian Credit Union it’s just $100. However you can open a HISA with any amount of money, making it a good option for young people or those just beginning to start saving.

Sometimes, making the best financial choice when your options are similar is tough! Why not get financial advice from one of our advisors? Visit your closest Meridian Credit Union branch today and ask to speak with a wealth advisor.

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