Tuesday, September 3rd, 2019
As a student, it's not always easy to save money, especially if you're living away from home. In addition to everyday expenses, tuition, course fees and textbooks can eat up a lot of your budget.
However, if you are able to piece together some savings, purchasing a GIC is a potential way to save your money and earn a little extra in interest.
GIC stands for Guaranteed Investment Certificate (at Tangerine, it stands for Guaranteed Investment). Like savings accounts, GICs offer higher interest rates than chequing accounts. They provide a guaranteed interest rate for a set term length—anywhere from short-term GICs at 30 days to long-term GICs at 5 or even 10 years—after which point they reach maturity and the money is generally either re-invested into another GIC or is paid out into another account.
It's important to note there are different types of GICs available. For example, a cashable GIC is not the same as a non-cashable one. The former can be cashed out prior to the date of maturity (though they may be restricted on when and how), whereas the latter is locked in for the entirety of the term. Some GICs require that you set aside a minimum amount of money—but not all. For more information on GICs, start here.
There are two reasons why GICs can work for students looking to save money:
For me, the inability to access my money until my GIC reaches maturity was a particularly important factor. Even though I'm generally on top of my finances, I don't always make the wisest decisions with my money. Opening a savings account made it easy for me to set money aside, but from time to time, I found myself withdrawing from my savings account to spend on unplanned expenses. Putting some of my savings into a non-cashable GIC meant it would have to stay put.
If you've read about GICs before, you might have come across the term laddering, which involves buying multiple GICs with different term lengths (you can read more about laddering here).
However, if you're living on a tight budget, purchasing multiple GICs may not be practical—and that's okay. Regardless of the type of GIC you choose, you're still setting smart savings habits simply by getting a GIC and deciding how much you can afford to put into it.
Although a smaller GIC may not necessarily yield a lot of interest, it's bound to boost your confidence in your own money management skills and get you thinking about how you might start saving in the future.
This article is provided for information purposes only. It isn’t meant to be relied upon as financial, tax or investment advice, makes no guarantees about future financial conditions or performance, and shouldn’t be considered a recommendation to buy or sell investments or financial products....Information contained in this article, including information related to interest rates, market conditions, tax rules, and other investment factors is subject to change without notice, and Tangerine Bank isn’t responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication, and Tangerine Bank doesn’t guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.