A Guaranteed Investment Certificate is a unique type of investment. When you invest in a GIC, you are effectively loaning a financial institution or bank your money for an agreed-upon period.

While deposited in a GIC, your money is safe, secure and backed by the Canadian Deposit Insurance Corporation (CDIC). You are guaranteed to receive the amount you invested back, and you will also receive a return on your investment based on the prevailing interest rate and term you have chosen. These unique qualities make GICs one of the safest ways to invest your hard-earned cash.

But how much cash should you invest to get the most from your GIC?

What factors can affect the amount to invest in a GIC

Many people use GICs as part of their long-term savings plan, which can include saving for a large purchase or a down payment on a home or property. With a GIC, they don’t have to worry about the security of their funds and the money typically earns more in a GIC than a product like a high-interest savings account.

The first thing to note is that, like most other investments, the more you invest in a GIC, the more you can potentially make. Because the return you get from your GIC investment comes from the interest paid on the amount of money you invest, it makes sense that the more money you lock away, the higher the return you will realize.

Many financial institutions and banks have minimum amounts you can invest in a GIC, such as $500. There may also be a maximum investment amount each year with a single institution or in a single GIC.

The length of the GIC term can also have a big impact on the return. Normally, the longer you leave your money invested, the more return you receive. A five-year GIC will offer a significantly higher interest than a 30-day or even one-year GIC.

For example, according to this GIC calculator, if you invest $5000 in a one-year GIC at 2.25% you will earn $113 over the year of your investment. Compare that to a five-year GIC, which can yield up to 3.40% interest and earn you $528 over that investment term.

There are gains to be made by extending the amount of your investment, as well as the term of your GIC. Often, your saving goal should determine how much you will invest in a GIC. If you are saving for a home down payment, for example, you will likely be putting more away than if you’re saving for a vehicle or vacation.

It is important to remember that you might also need to pay a penalty if you choose to withdraw your GIC funds earlier than the term date.

Even if you can’t immediately maximize your GIC investment, there are still many advantages to start investing. As previously mentioned, GICs carry very little risk and you can make use of strategies like GIC laddering – or investing in a series of one-year GICs that you can reinvest or cash in yearly – to grow your investment.