Why GIFs and HISAs| 5 answers from an expert
Philippe Guillemette, Financial Planner, explains why guaranteed interest funds and High Interest Savings Accounts are two attractive solutions in times of high interest rates.
1. Philippe, what are GIFs and HISAs? What are their similarities and differences?
“Let's look at the similarities first. Guaranteed interest funds (GIFs) and High Interest Savings Accounts (HISAs) are both risk-free investment options since the money invested in them is guaranteed. Moreover, in both cases, the returns can be very attractive.
Second, GIFs and HISAs also provide easy access to liquidity. They can therefore be useful for achieving short-term goals or projects. However, a HISA is more interesting in this respect, since the money can be withdrawn at any time and without fees.
As for the differences, the main one is that GIFs are term investments. This means that you choose a fixed term for your investment (1 or 5 years, for example). The return is therefore known in advance and guaranteed for the duration of the investment. On the other hand, the return of a HISA may vary over time, depending on changes in interest rates.
Another difference is that, unlike other guaranteed investment options such as some banks’ GICs, GIFs can be withdrawn at any time. This is an interesting advantage, but there is a fee if the withdrawal is made before the maturity date. So, it’s best to keep the money invested for the entire term.”
2. Why are GIFs and HISAs considered good investments in times of rising interest rates?
“Because high interest rates make GIFs and HISAs more attractive. So, including them in your investment portfolio is a good way to reduce risk and guarantee a return that helps you reach your financial goals more readily.”
3. Can GIFs and HISAs also be advantageous in a context of economic uncertainty?
“Yes, definitely! In times of economic uncertainty, the guaranteed returns such as those offered by GIFs and HISAs represent a reliable option for many. They’re safe havens not only for those who would prefer not to take any risks, but also for those who would simply prefer to wait and see how the economic situation develops.
In addition to being an excellent investment option, a HISA is ideal for building an emergency fund. The money you invest in a HISA can be kept safely for financial contingencies. It also generates returns that are much more attractive than those you would get if you were to let those same savings sit in a regular bank account.”
4. In your opinion, Philippe, are there other scenarios where GIFs or HISAs could be beneficial?
“Yes, there are many. They can, for example, be beneficial for someone who invests in an RRSP or a TFSA, since the gains would then be made tax free.
GIFs can also be used for medium-term savings. If you are planning a major project, such as purchasing a home, renovating or a trip, you can know the exact amount of earnings your investment will provide and, in that way, will be able to better plan your expenses.
For a business, a HISA can also be an excellent way to leverage excess liquidities. The money remains accessible and can even be used for business operations.
These are just three examples but there are, of course, many more. Everyone has a unique situation and should discuss the best scenarios for their use with an advisor.”
5. Do GIFs and HISAs have other advantages for business owners?
“Yes. Both products come with the benefits of segregated funds, including protection against creditors. If a company were to face bankruptcy or be the target of a lawsuit, the money held in a GIF or a HISA could be unseizable. This advantage can of course be reassuring for business owners.
However, it is important to be aware that certain laws and conditions apply to creditor protection. Take the time to verify your situation with an advisor to ensure that this option is available to you.
In the end, whether you are an employee or a business owner, the most important thing to remember is to properly diversify your assets. An advisor is in the best position to determine the most effective ways to integrate GIFs and HISAs to create a balanced portfolio. Consulting your advisor will allow you to optimize your strategy based on your own needs and goals.”
As a financial planner at iA Financial Group, Philippe Guillemette contributes to the creation of computer tools and specializes in the optimization of insurance and savings product performance.
Advice Zone and economic news
Whatever product you’re interested in, the following tools will give you an idea of how much to invest, which you can then discuss with your advisor.