Boost your savings power with high-interest options: GICs and HISAs explained

You work hard for your money. It should do the same for you. If you’re tired of watching your hard-earned savings earn you just a few cents each month in a regular chequing or savings account, you have options. Two popular choices that can help you grow your savings are high-interest savings accounts (HISAs) and guaranteed investment certificates (GICs).

All about HISAs

True to its name, a high-interest savings account (HISA) is a bank account that offers interest rates that are higher than those you’d earn with a regular savings account. Regular savings accounts in Canada tend to offer low interest rates, usually anywhere between 0.01% to 0.05%.¹ Meanwhile, HISAs generally operate the exact same way as regular savings accounts but offer much higher rates – usually between 1.5% up to 5% or more.

The benefit for you? Passive income. With a HISA, your savings grow faster without any extra effort on your part.

When it comes to boosting your saving power, HISAs sound (almost) too good to be true. But it’s important to remember that even with a HISA, you’re taking a big step with your money.

When deciding whether a HISA is right for you, here are a few things to keep in mind:

• Promotional vs. standard rates: Is the account you’re looking at a true high-interest savings account, or is it a temporary promotional interest rate on a traditional savings account? Sometimes banks offer a higher interest rate for a limited time to encourage you to open an account. After a few months, the rate may return to a lower standard rate.
• Access and transactions: Are you able to perform your usual transactions and withdraw your money when you want? Online banks often offer the highest interest rates because they don’t have brick-and-mortar operating costs. However, it can sometimes be more difficult to perform transactions or withdraw funds if debit cards or ATM access aren’t available.
• Name vs. reality: Just because a bank account is called a HISA doesn’t mean it offers higher-than-usual interest rates. Do your research and compare options to make sure you’re getting the best return before depositing your money.
   

All about GICs

Guaranteed investment certificates (GICs) are low-risk investments that protect your principal and offer a guaranteed rate of return over a certain period.

When you invest in a GIC, you're essentially lending your money to your financial institution for a set amount of time, known as the term. For most GICs, the term is anywhere from six months up to 10 years. In return, your financial institution promises to pay you back the initial amount you invested, plus an interest rate that's typically higher than what you'd get with a regular savings account.

When it comes to investing in a GIC, here are a few things to keep in mind:

• Types of GICs: There are different types of GICs you can choose from, based on your needs.
• Cashable GICs: If you need access to your cash before the GIC matures, you can choose a cashable GIC. These allow early withdrawals, although you might earn a slightly lower interest rate.
• Non-redeemable GICs: If you’re confident you won’t need access to the cash for the full term, you can opt for a non-redeemable GIC, which locks in your funds until maturity but usually offers a higher interest rate.²
• Minimum investment: GICs typically have a minimum investment amount – usually $500 – but there’s often no maximum.
• Type of interest: Most GICs pay a fixed rate of interest. Some offer a variable rate based on the performance of a benchmark. These are sometimes called “market-linked” GICs. While your principal is protected, there’s no guarantee you’ll earn interest if the benchmark performs poorly.
• Interest payout schedule: Depending on the GIC, interest may be paid monthly, every three months, every six months, once a year, or at maturity when the term is complete.
   

A HISA, GIC, or both?

So, how do you choose between a HISA and a GIC? It all depends on your financial goals and timeline.

If you have a specific savings target in mind and don’t need immediate access to your funds, a GIC might be the way to go. You can lock in a higher interest rate and watch your money grow predictably over time.

On the other hand, if you want the flexibility to access your savings whenever you need them, a HISA might be a better fit. You’ll still earn a competitive interest rate without worrying about penalties for early withdrawals.

Another option is creating a “savings ladder” with both. Let’s say you have $3,000 in savings. You could:

• Put $500 into a HISA for worry-free access to cash.
• Invest $500 into a one-year GIC.
• Invest $500 into a two-year GIC.
• Continue staggering terms with the remaining funds.
   

By using this strategy, you’ll have regular access to cash with your HISA, plus principal maturing at scheduled intervals. This way, you can take advantage of higher interest rates for longer-term investments while still maintaining flexibility.

When it comes to HISAs and GICs, it's all about finding the right balance between accessibility and earning potential.

Next steps: Make your savings work harder for you

Ready to start stretching your savings dollars? Let’s chat.

We’re here to help you create a personalized savings strategy that makes the most of high-interest options like HISAs and GICs. Together, we can explore how these tools can help you reach your financial goals faster.

Whether you're saving for a down payment, a dream vacation, or a rainy day, we’ve got you covered. Reach out today and let’s start maximizing your savings potential.

Learn more from our very own Fraz Mirza!

Sources

MacGregor, S. “What is a high-interest savings account?” NerdWallet. May 1, 2024. https://www.nerdwallet.com/ca/banking/what-is-a-high-interest-savings-account.  

“What is a GIC and how does it work?” Ontario Securities Commission. Sept. 25, 2023. https://www.getsmarteraboutmoney.ca/learning-path/gics/what-is-a-gic-and-how-does-it-work/.