Christopher Liew: Are GICs still worth it? What Canadians are choosing instead

Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, to discuss markets and investment trends.

Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

Guaranteed Investment Certificates (GICs) have made a strong comeback over the last few years, offering stable, predictable, and risk-free returns. But as interest rates shift and with inflation remaining a concern, some investors are rethinking whether locking their money into a GIC still makes sense.

For some, GICs remain a dependable way to protect savings. For others, the opportunity cost is becoming an issue. Below, I’ll go over some of the benefits and drawbacks of GICs and outline some of the alternatives that investors are switching to instead.

What do GICs offer?

GICs offer something most investments can’t, which are risk-free returns.

Your principal is protected, and your return is fixed for the entire term. Most GICs are insured through CDIC or provincial deposit insurers (up to set limits), making them one of the safest places to park your money. For cautious investors or anyone saving for short-term goals, that guarantee can be reassuring.

The limitations of GICs

One of the main drawbacks of GICs is that they come with a set term ranging between one and 10 years. Investors are required to keep their money locked up in the GIC until the end of its term, at which point they’ll receive their money back with interest. If you had an emergency and needed to access the money, your funds can be withdrawn prematurely with a penalty.

GIC rates tend to fluctuate with the central bank’s interest rate. With the BoC’s high interest rates over the past few years, short-term GIC rates surged, attracting savers who wanted higher yields without taking on the risk of investing in volatile market conditions.

Recently, the interest rate has slowly decreased, with the central bank just announcing a drop to 2.25 per cent in late October. This means that GIC rates (especially short-term GICs) aren’t as good as they were when the interest rate was higher.

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Generally speaking, longer GIC terms come with a higher return, while shorter GIC terms yield lower returns. But with the interest rate dropping, even long-term GICs aren’t able to offer what they were in recent years, presenting a potential opportunity cost.

Namely, investors are questioning whether their money could generate greater returns over the same time period if they invested it elsewhere

GIC alternatives to consider

In terms of safety and reliability, you can’t beat GICs as the word ‘guaranteed’ is quite literally written into the investment itself. Even if the bank you purchased the contract through goes bust, all GIC investments up to $100,000 are backed and insured by the CDIC.

With GIC returns falling, though, here are where some of the alternatives that investors (or just those who passively invest to save) are turning.

1. High-interest savings accounts (HISAs)

HISAs have become a go-to option for those looking for competitive interest rates without locking in their money. Many online banks now offer rates that rival or surpass some short-term GICs, all while allowing unlimited access to cash.

HISAs work well for emergency funds, short-term savings, or anyone who wants liquidity with minimal risk.

The tradeoff is that unlike a GIC, the rate is never locked in. Banks can reduce it whenever market conditions change. Some institutions also rely on promotional rates that drop after a few months. So while HISAs offer much more convenience than GICs, they lack the certainty of a guaranteed return.

2. Money market funds

Money market funds invest in very short-term, high-quality instruments like treasury bills and commercial paper. They aim to preserve capital while offering a yield that typically moves closely with current interest rates.

They’re not insured by CDIC, but their underlying holdings are generally considered low risk and have much less volatility compared to bond funds or stocks.

They work well for parking cash for a few months, or for investors looking for stable returns with near-instant liquidity.

The downside is that returns are not guaranteed and can fluctuate. Fees can also eat into yields, and although losses are rare, money market funds can decline in stressed markets. They offer flexibility that GICs do not, but they do not provide the same level of certainty or insurance protection.

3. High-interest savings ETFs (cash ETFs)

High-interest savings ETFs pool large cash deposits across multiple Canadian banks and pass the interest back to investors. Their yields often match or exceed online HISA rates, and they can be bought and sold through any brokerage, making them a popular place to park cash inside TFSAs, RRSPs, or non-registered accounts.

Unlike a traditional high-interest savings account or GIC, these ETFs aren’t CDIC insured, and their unit prices can fluctuate. They also settle like regular ETFs, so withdrawals could take a day or two, not instantly. For investors comfortable with these tradeoffs, they offer liquidity and competitive returns.

Are GICs still worth it moving into 2026?

GICs are far from disappearing from portfolios, but they’re no longer the default choice they became during the rate surge of the last two years. Whether they’re still “worth it” depends largely on your personal goals, timeframe, and risk tolerance.

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