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CTV Your Money

November 17, 2015 - The basics of term deposits and GICs

The words term deposit and Guaranteed Investment Certificate are bandied about when types of investments are discussed, but do you really know what they are? Here’s the low down on what they are and how they might be able to fulfill your investment needs:

  • These terms are used somewhat interchangeably and are similar in that they both offer a guaranteed investment. However, term deposits have a shorter life, usually one year or less. Guaranteed Investment Certificates, or GICs, have a term of one year, five years or sometimes more.
  • These are great if you have a sum of money – it could be as little as $500 or it could be in the thousands – which you want to save and grow but will want access to at some point in the near-ish future.
  • You can even get a guaranteed return depending on the type of GIC you choose. Some types give you a definite interest rate while others may rise over time or may fluctuate with the market. But whatever type you choose, you won’t lose any of your principal.
  • Generally, the longer the term of the investment, the higher the interest rate you’ll get.
  • Different types of term deposits and GICs come with different features. For example, some will pay interest out over the term while others allow the interest to compound and grow for the duration of the investment. Others have the flexibility to be cashed out early if you really want to.
  • Keep your eyes open and shop around for interest rates and features and speak with someone at your financial institution to see if a term deposit or GIC is right for you.

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