How does a 90-day (3 month) GIC work?
A 90-day GIC works like any other GIC: your cash is deposited with a bank or credit union for a set period of time known as the term (i.e. 90-days), and once the term ends, you’re guaranteed to get your money back plus interest. Unlike with a savings account, the interest rate on a GIC can’t spontaneously drop and will be locked-in for the duration of your term.
In the case of most GICs, you can’t access your cash until the term ends.
The advantage of a short-term 90-day GIC is that you won't have to be parted with your cash for long, making it the ideal investment vehicle for achieving short-term savings goals and quick guaranteed (albeit conservative) returns. Your interest will be paid at the GIC’s maturity (i.e. after 90 days) and isn’t compounded monthly.
What’s the difference between an unregistered and registered GIC?
An unregistered GIC is considered a personal investment account and doesn’t come with any government tax advantages. While your earnings will be subject to tax, the benefit of unregistered accounts is they can offer greater flexibility. You can take out the cash from your GIC once the term ends without having to worry about government-mandated withdrawal or contribution limits. By leveraging a non-registered GIC, you can also leave more room in your registered government accounts (TFSA and RRSP) for longer-term, higher-growth investments with a robo-advisor or online brokerage.
A registered GIC fundamentally works the same way as any other GIC but the account is held in a registered government account and will receive tax advantage either in the form of tax-free earnings (TFSA) or tax-deferment (RRSP).
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