GIC vs Savings Account: A Comparison Guide

In a world full of uncertainty, the best that people can do is to prioritize savings through different styles to meet their long and short-term financial plans. There are two main solutions for savings, which are GIC and savings accounts, with additional features, privileges, and challenges.

Life can be very unpredictable. Therefore, it’s always great not to focus your money on the current moments but also mind the future. Ideally, GICs and savings accounts can be excellent opportunities for individuals to secure their future. However, you should ensure you’re dealing with a reputable organization to avoid falling victim to endless scamming and theft.

Let’s discuss saving options to help individuals choose which suits them best.

What is GIC?

Guaranteed Investment Certificates, popularly abbreviated as GIC, refer to a savings option with limited chances of losing one’s investments thanks to the government-provided certificate assuring the investor of a fixed rate of return and security.

What is a savings account?

Conversely, a savings account, the most commonly used solution, allows investors to deposit their money and earn a stipulated amount of interest within different timelines.

Similarities Between GIC vs Savings Accounts

A GIC account and a savings account boast several similarities, including offering adequate security of investment to individuals. Additionally, both saving solutions are quite convenient to users, providing free access to their financial reports and trends thanks to various banking platforms.

Depending on several factors, you can be assured of earning a given amount of interest with GIC and savings accounts. Lastly, savings accounts and GIC provide individuals with reliable liquidity, making them fit for financial plans.

Differences Between GIC vs Savings Accounts

Besides the above similarities, GIC and savings accounts have several features that tell them apart, including:

GIC vs Savings Accounts – Interest Rates

Interest rates remain a major determining factor for most investment and saving options, including GIC and savings accounts. For investors seeking to build their liquidity and not high returns, embracing savings accounts is advisable, for they offer lower interest rates in the long term.

On the other hand, Guaranteed Investment Certificates provide higher returns to investors due to the significant rates of interest involved. While your savings may be locked in for a specified period, the final returns can be quite appealing with GICs.

GIC vs Savings Accounts – Risks Associated

The risks associated with GICs and savings accounts differ significantly as both bear unique regulations and features. For instance, GIC boasts few chances as the finances are locked within a particular period to be released when it lapses. In such situations, investors can hardly discontinue their decision to save for the future or misuse the funds for inappropriate reasons.

Conversely, while savings accounts also provide investors with enough security, the levels might be as high as those of GICs as the individual can always decide to alter their previous saving plans with little or no limitations. Additionally, savings accounts are more vulnerable to fraud due to the rising number of scammers globally.

GIC vs Savings Accounts – Terms of Operation

Like any other savings options, both GICs and savings accounts bear different terms of operation. Regarding savings accounts, banks and other financial institutions provide no specific period for investors to deposit their savings. On the contrary, GICs boast a fixed period, usually between several months or years, depending on the investor’s financial goals.

Additionally, GICs can impose a stipulated penalty on investors wishing to discontinue their savings before the fixed return period lapses. For savings accounts, there are no possibilities of penalties whenever an investor deactivates or neglects their savings accounts. All the terms of operation should be mutually agreed upon during the initial stages of commencing the savings.

GIC vs Savings Accounts – Deposit Requirements

Another differentiating factor between GICs and savings accounts is the deposit requirement. With savings accounts, many banks and other financial institutions do not set any minimum or maximum savings deposits into the accounts.

On the other hand, some GCIs may specify the minimum amount that interested investors can deposit into their savings accounts. Individuals with limited finances might not be the best investors of GICs as sometimes the requirements might be too high.

GIC vs Savings Accounts – Financial Needs

Investors go for different saving options due to various financial needs. For those with short-term needs or who are required to save for upcoming events or emergency funds, savings accounts are the best solution because they offer easier accessibility.

Conversely, investors seeking to achieve specific financial goals, which they have adequately planned and set a reliable timeline, can go for the GICs. This is due to their high security and interest rates. GICs’ financial needs should be long-term and not otherwise.

GIC vs Savings Accounts – Inflation Impact

One of the most crucial factors investors should consider when choosing a solution for their savings is inflation. Economic misfortune affects various saving options differently in short and long-term savings.

For instance, a savings account might be vulnerable to inflation compared to the GICs, especially if the interest rates constantly change within different years. GIC investors can be assured of higher protection against inflation due to its potential for greater returns and stable interest rates.