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It’s time to drain down some of the billions sitting in savings accounts.

A suggestion on where to put that money: One-year guaranteed investment certificates (GICs). With rates as high as 2.5 to 3.1 per cent, they offer complete safety in these uncertain times and a return that compares well with alternatives.

Big bank economists have estimated cash savings at around $200-billion to $300-billion – this is money that went unspent during the pandemic because of economic lockdowns. A lot of it is sitting in bank savings accounts, which pay 0.05 to 1.7 per cent right now. Putting some of this money into a one-year GIC could significantly increase your risk-free return. Whether through Canada Deposit Insurance Corporation or provincial credit union plans, deposits in GICs and savings are covered by deposit insurance.

As ever, alternative banks lead on GIC rates. But the gap is unusually small right now, which means people with money in big bank savings accounts may be able to move their funds into a competitive GIC at the same institution. This is a big win on convenience.

Canadian Imperial Bank of Commerce has been a strong competitor on GIC rates this year and its current one-year bonus rate is 2.5 per cent. Bank of Nova Scotia and Toronto-Dominion Bank showed a 2.6 per cent rate on their websites recently, while Royal Bank of Canada featured a one-year special rate of 2.5 per cent and Bank of Montreal showed 2.25 per cent.

Top rates at the end of April included 3.1 per cent from EQ Bank and Oaken Financial and 3 per cent from LBC Digital, Peoples Trust, Wyth Financial and Motive Financial.

These rates are for non-redeemable GICs. If you’re worried about needing access to your money in the next 12 months, check out rates on cashable GICs. An example of the tradeoff for liquidity: TD’s one-year cashable GIC has a rate of 1.8 per cent.

The argument against one-year GICs is that returns are negative after you factor in the most recent inflation rate of 6.7 per cent. On the plus side, you have zero risk of losing money if you stay within deposit insurance limits. That’s no small advantage as stocks wobble, bonds fall in price, housing softens and the risk of an economic slowdown builds as interest rates climb.

That rising rate trend suggests keeping some money aside in case interest rates on GICs climb further.

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