Is a GIC a Good Investment in 2025?

You're sitting there with some money to invest, and everyone's talking about market volatility. Your neighbor just lost 15% in tech stocks. Your coworker won't shut up about crypto crashes. Meanwhile, that GIC brochure from your bank is looking pretty appealing.

But here's the thing: guaranteed returns sound great until inflation starts eating your lunch. So are GICs actually worth it in 2025?

The honest answer is... it depends. Let us walk you through what you need to know.

What Are GICs and Why They Matter Now

A Guaranteed Investment Certificate is exactly what it sounds like. You give the bank your money for a set period, they pay you a fixed interest rate, and you get your principal back when it's done. No surprises, no sleepless nights watching market charts.

Current best GIC rates hover around 3.70% to 4.00% depending on the term. That's not terrible, especially when you remember that just a few years ago, GICs were paying less than 2%.

But here's what's changed. The Bank of Canada has been busy. They've cut rates from 5.00% to 2.50% since January, with more cuts expected. This means the GIC rates you see today? They're probably the best you'll get for a while.

The timing matters because Canadians poured billions of dollars into GICs in the months during 2022's market chaos. When people get scared, they want guarantees.

The Case for GICs in 2025

Let's start with the obvious: you can't lose money. Well, your principal anyway. That matters more than you might think.

Your money is protected up to $100,000 per institution by CDIC insurance. The federal government is even considering bumping that to $150,000 because inflation has made the current limit feel pretty thin.

GICs are perfect for money you know you'll need at a specific time. Planning to buy a house in three years? A 3-year GIC locks in your down payment and gives you a guaranteed return. No market timing required.

Business owners love them too. If you're a contractor with irregular income, business GICs let you park surplus cash and earn something while you wait for the next big project.

And let's talk about your peace of mind. 44% of GIC buyers prioritize investment safety above everything else. Sometimes peace of mind is worth more than an extra percentage point.

The Case Against GICs in 2025

Now for the uncomfortable truth. GICs haven’t been the best at protecting purchasing power over time. Real returns were negative for 17 of the last 30 years after accounting for inflation.

Think about that. Your "safe" investment actually made you poorer most of the time.

With inflation currently at 1.9% but expected to trend higher, a 3.70% GIC gives you maybe 1.70% real return. Before we even talk about the tax hit.

Speaking of which, GIC interest is 100% taxable at your marginal rate. If you're a high earner at the top tax bracket, that 3% GIC becomes about 1.4% after tax. Suddenly it doesn't look so attractive.

Then there's the opportunity cost. While you're locked into that GIC, everything else might be taking off. The stock market has historically returned around 7% annually. Even if it only does half that well, you're still leaving money on the table.

GICs vs Your Other Options

Let's get practical. What else could you do with that money?

High-yield savings accounts are paying 3.5% to 4.0% right now. That's almost as much as a GIC, but you can access your money anytime. Hard to argue with that flexibility.

Bond funds offer something interesting: capital gains are taxed at 50% instead of 100% like GIC interest. Plus you can sell them whenever you want. The trade-off? Bond prices move up and down with interest rates.

For the growth-minded, a balanced portfolio of stocks and bonds has historically crushed GICs over longer periods. Yes, there's more volatility. But if you're investing for 10+ years, that volatility tends to smooth out.

Even within the "safe" category, you have choices. A GIC laddering strategy lets you capture higher long-term rates while getting access to some money every year. It's like having your cake and eating it too.

Who Should Actually Consider GICs?

GICs aren't for everyone, but they're perfect for specific situations.

Contractors and small business owners with unpredictable income love them. You can park money from a big project in a short-term GIC and know exactly when you'll get it back. No worrying about market timing when you need to pay quarterly taxes.

Pre-retirees often use GICs as part of a de-risking strategy. Maybe you put 20% of your portfolio in GICs to cover your first few years of expenses, then keep the rest invested for growth. It's a reasonable middle ground.

Pro Tip: If you happen to be a small business owner close to retirement, we’ve put together a comprehensive strategy here just for you.

Anyone with short-term goals should consider them. Need money for your kid's university in two years? A GIC removes the guesswork.

But here's what drives me crazy: people putting their entire retirement savings in GICs. 23% of Canadian investors own GICs, making them the second most popular investment after mutual funds. That's a lot of people potentially shortchanging their future.

The Bottom Line

Are GICs a good investment in 2025? They're a good tool for specific jobs.

Use them for money you'll need in the next few years. Use them for the portion of your portfolio where you absolutely can't afford to lose principal. Use them when you're so stressed about market volatility that you can't sleep.

But don't use them as your entire investment strategy. The math just doesn't work for long-term wealth building.

If you're looking at GICs because you're worried about market risk, consider this: the biggest risk might be playing it too safe. Inflation is sneaky. It doesn't crash your account in a day like the stock market might. It just quietly erodes your purchasing power year after year.

The smart move? Use GICs as part of a broader strategy. Park your emergency fund and short-term goals in GICs or high-yield savings. Invest everything else for growth.

If you’re truly looking for a holistic approach to investing, reach out to the investment pros at Surcon Mahoney Wealth Management. Book a free consultation with us today!