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The risk of sidelining your savings

GICs and Savings accounts are guaranteed – but not safe from investment risks. Low interest savings vehicles can be a good approach if they are part of a bigger financial plan.

Over the past five years, many Canadians tried “playing it safe” with extra deposits in GICs and savings accounts. Two of the risks with using GICs, savings accounts and other deposits as your primary savings are:

  • Inflation
  • Income tax

Reduced buying power by 10%

Remarkably, after tax and inflation, saving accounts and one-year GICs lose money at today’s rates. In fact, after tax and inflation, one-year GICs have lost money for 10 years in a row. After 10 years of investing in one-year GICs, your buying power would be down by about 10%.*

If you’re retired, nearing retirement, or just worried about volatile financial markets -- it’s important to get advice on achieving a balance of investments that protects you from all investment risks.

Investors Group has conservative investment options to fit your plan. Ask an Investors Group Consultant for advice.

Date reviewed: February 1, 2015

*Gross GIC rate of return is 3.56% for 1-year GICs from June 2010 to June 2014 before taxes and inflation as published by the Bank of Canada. Interest earned is 2% after taxes using a marginal tax rate of 46.40%. After inflation returns is after tax results less the 12-month average of Statistics Canada’s Consumer Price Index rolling monthly Inflation.

The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment.

GICs issued by Investors Group Trust Co Ltd., and/or other non-affiliated GIC issuers. Minimum deposit, rates and conditions are subject to change without notice.

Written and published by Investors Group as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice.

Seek advice on your specific circumstances from an Investors Group Consultant.

© Investors Group Inc. 2014 (08/2014)