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In the world of financial instruments, Guaranteed Investment Certificates (GICs) stand out as a secure and predictable way to grow your savings. Whether you’re a seasoned investor or new to the world of finance, GICs offer a straightforward option to earn a fixed return on your investment over a specified period. In this article, we’ll explore everything you need to know about GICs, from their definition and types to their benefits, risks, and considerations.

What are Guaranteed Investment Certificates (GICs)?

A Guaranteed Investment Certificate (GIC) is a type of investment offered by financial institutions, such as banks and credit unions. It’s a low-risk investment vehicle where you deposit a certain amount of money for a predetermined period, known as the term. In return, the financial institution guarantees to repay your initial investment, known as the principal, along with a fixed interest rate at the end of the term.

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How Guaranteed Investment Certificates (GICs) Work


Guaranteed Investment Certificates (GICs) are a type of investment vehicle that provides a secure way to earn a fixed return on your investment over a specified period. GICs are offered by financial institutions such as banks, credit unions, and other financial organizations. They are particularly attractive to investors seeking capital preservation and a predictable source of income. Here’s how GICs work:

1. Investment Period and Terms

When you invest in a GIC, you choose a specific investment period, also known as the term. The term can vary widely, ranging from a few months to several years. During this period, your money remains invested in the GIC, and you cannot access it without certain conditions being met.

2. Principal and Interest Rate

You deposit a certain amount of money into the GIC, which is referred to as the principal. The financial institution guarantees to repay your principal amount at the end of the GIC’s term. In addition to the principal, you earn a fixed interest rate on your investment. This interest rate is determined when you purchase the GIC and remains constant throughout the term.

3. Interest Payments

Interest on GICs can be paid in various ways, depending on the terms of the GIC:

  • Simple Interest: With simple interest GICs, the interest is calculated based on the initial principal amount and is paid out at the end of the term.
  • Compound Interest: Compound interest GICs calculate interest not only on the initial principal but also on the accumulated interest from previous periods. This results in higher overall returns, and interest can be paid out periodically or at the end of the term.

4. Redemption and Maturity

GICs have a maturity date, which marks the end of the investment term. On the maturity date, the financial institution returns your initial principal along with the interest you’ve earned over the term. At this point, you have the option to renew the GIC for another term or withdraw your funds.

5. Redemption Before Maturity

In some cases, you might need to access your funds before the GIC’s maturity date. However, GICs are designed to be held until maturity, and withdrawing funds before maturity can result in penalties or reduced interest payments, depending on the terms of the GIC.

6. Security and Risk

One of the key advantages of GICs is their safety. Your principal is guaranteed by the financial institution, making GICs a low-risk investment. However, this safety also means that GIC returns tend to be lower than those of riskier investments such as stocks or mutual funds.

Types of GICs

1. Fixed-Term GIC: This is the most common type of GIC. You invest a specific amount for a fixed term, which can range from a few months to several years. The interest rate remains constant throughout the term.

2. Redeemable or Cashable GIC: These GICs allow you to access your funds before the term’s maturity date, although there might be penalties or reduced interest rates for early withdrawal.

3. Non-Redeemable GIC: With non-redeemable GICs, your money is locked in for the entire term, and you cannot access it before maturity without penalties.

4. Variable-Rate GIC: The interest rate on these GICs can fluctuate based on changes in market interest rates.

5. Registered GIC: These are GICs held within registered accounts like Tax-Free Savings Accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs), offering tax advantages.

Benefits of GICs


1. Safety: GICs are considered low-risk investments because your principal is guaranteed by the financial institution, making them a safer option compared to more volatile investments like stocks.

2. Predictable Returns: GICs offer a fixed interest rate for the entire term, allowing you to know exactly how much you’ll earn upon maturity.

3. Diverse Terms: GICs come with a variety of term options, enabling you to choose a timeframe that suits your financial goals and needs.

4. Steady Income: GICs provide a regular source of income for those looking for a reliable way to grow their savings.

5. Easy to Understand: GICs are straightforward investments, making them suitable for investors who prefer simplicity and minimal involvement in the stock market.

Risks and Considerations

1. Lower Returns: While GICs offer safety, they tend to have lower returns compared to riskier investments like stocks or mutual funds.

2. Liquidity: Depending on the type of GIC, your money might be tied up for a specific period, limiting your access to funds.

3. Inflation Risk: GICs might not always keep up with inflation, potentially reducing the purchasing power of your returns over time.

4. Opportunity Cost: By investing solely in GICs, you might miss out on potentially higher returns from other investment opportunities.

5. Penalties for Early Withdrawal: If you need to access your funds before the GIC’s maturity date, you could face penalties or receive reduced interest payments.

How to Invest in GICs


1. Research: Explore various financial institutions and compare GIC offerings, considering factors such as interest rates, terms, and penalties for early withdrawal.

2. Choose a Type: Decide on the type of GIC that suits your financial goals, whether it’s a fixed-term GIC, redeemable GIC, or another type.

3. Select a Term: Choose a term that aligns with your investment timeline, whether it’s a few months or several years.

4. Investment Amount: Determine the amount you want to invest in the GIC.

5. Purchase: Visit a financial institution or use online banking services to purchase the GIC. Ensure you understand the terms and conditions before committing.


Guaranteed Investment Certificates (GICs) offer a secure and straightforward way to invest your money with predictable returns. As a low-risk investment option, GICs provide safety and peace of mind, making them suitable for individuals who prioritize capital preservation and steady income. However, it’s important to consider your financial goals, risk tolerance, and investment horizon when deciding whether GICs are the right choice for you. By understanding the various types of GICs, their benefits, risks, and how to invest, you can make informed financial decisions that align with your long-term objectives.

Vati is your comprehensive guide to both career planning and navigating the GIC process in Canada. Seamlessly transition from envisioning your career path to understanding the essential aspects of the Guaranteed Investment Certificate (GIC) for international students. Let Vati support you in achieving your academic and professional aspirations in Canada.


What is GIC for students?

GIC for students is a specific type of GIC designed for international students coming to Canada to study. As part of the study permit application process, some students are required to show proof of funds, which can include obtaining a GIC. The GIC acts as financial support during the student’s initial stay in Canada.

Who pays for GIC?

The individual investor pays for the GIC. When you purchase a GIC, you deposit your own funds into the account. The financial institution uses these funds to offer the guaranteed return at the end of the GIC’s term.

How much GIC is required for Canada?

The amount of GIC required for Canada varies based on the institution and the duration of your study program. As of the latest information, students applying for a study permit may need to provide evidence of CAD $10,000 as part of the GIC requirement. However, it’s crucial to check with the specific financial institution and immigration authorities for the most accurate and up-to-date information.

Please note that financial regulations and requirements can change, and it’s recommended to consult official sources or professional career assessment advisors for the latest and most accurate information regarding GICs for students and immigration requirements.

Vati Team

Author Vati Team

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