Personal Finance

Should I invest my 40K school money in GICs?

  • Last Updated:
  • May 30th, 2015 10:07 pm
[OP]
Newbie
May 29, 2015
2 posts
Mississauga, ON

Should I invest my 40K school money in GICs?

Hello everyone,

I'm a personal finance newbie and I'm looking for serious advice on how I can properly manage/invest my savings for school.

My current net worth is almost 40k. It took about almost 3 years to save this amount due to bills (rent, food, etc.). I've been saving 50-60% of my income from all sorts of jobs ranging from 24-30k/year.

Of the 40k I have, 6k is in a chequeing account and 34k is in a normal TFSA earning 0.8% at Scotiabank.

I want to see if my decision, based my current knowledge of PF, to move my money to a tax-free savings GIC would be the best route to shelter my savings from inflation and earn a little bit something while I'm in school.

I plan to move my 20K to a 2yr and 3yr Tax-free GIC with People's Trust (PT) earning 2.45% interest so I can get this back for my second to the last and final year in college.

I am also considering putting 10K to a 1yr Tax-free GIC with PT earning 2.45%

So I have another 10K left for the first year to pay tuition, books, and living expenses.

Just to note, I currently live with my parents and will no longer have to pay rent when I start school. I will probably only buy caffeine pills (no Timmyes) and protein powder to supplement my diet and moderate exercise so I'm a well-oiled learning machine.

Am I thinking about this the right way? Should I put all my money on a GIC? Should I consider putting less and putting away some for emergency funds?

The money will no longer be available when I put it in a GIC, if I understand this correctly. So I don't really have a lot of room for anything else that I haven't thought of.

I'm going to study some computer related diploma at Seneca.

The cost of my tution is 4k per year for the diploma. I'm getting my credits first before I go pursue a degree. I'm an immigrant (turned Canadian citizen recently) so my previous schooling isn't really going to help.

Books are 1.5k.

Transportation: I estimate to be 1200 to 1300 for the first year using GO Transit.

All in all that is 6.8K. So, I have 3.2k left for unaccounted expenses for the first year.

I just want to do this right and want to be debt/student loan free when I finish my diploma/degree.

I haven't researched OSAP. But I have a suspicion that they wouldn't really help me since they know how much I earned based on the income tax I submitted.

Forgive me for my formatting. I'm new to the forums.

Thank you for reading! I hope to learn a lot from you guys!

Edit: corrected TFS GIC interest rates
5 replies
Deal Addict
Jan 2, 2015
1366 posts
391 upvotes
Toronto, ON
Congrats on saving that amount! GICs are only fine for a portion of your savings (sometimes you need cash quick), but some credit unions offer escalator GICs that offer a somewhat higher interest rate in the first two years and a higher one in the third. You can withdraw your cash early but you'll get lower interest, though still better than 0.8%.

You might also consider a GIC ladder. I wouldn't put the whole thing into the ladder, take some out and put it in a regular savings or TFSA savings account so, again, you can get cash quick if necessary. A ladder is generally a collection of one, two, three, four, and five year GIC. Every year, you roll over a matured GIC into a 5 year GIC. This way you can potentially get cash once per year, and it can avoid very low interest rates sometimes. (If you put cash into a GIC for a year when rates are low, and then they rise, next year you'll have some cash that you can invest at a higher interest rate.)
Deal Addict
User avatar
Jan 14, 2012
1241 posts
280 upvotes
Woodbridge
metasnake wrote:
May 30th, 2015 10:42 am
Hello everyone,

I'm a personal finance newbie and I'm looking for serious advice on how I can properly manage/invest my savings for school.

My current net worth is almost 40k. It took about almost 3 years to save this amount due to bills (rent, food, etc.). I've been saving 50-60% of my income from all sorts of jobs ranging from 24-30k.

Of the 40k I have, 6k is in a chequeing account and 34k is in a normal TFSA earning 0.8% at Scotiabank.

I want to see if my decision, based my current knowledge of PF, to move my money to a tax-free savings GIC would be the best route to shelter my savings from inflation and earn a little bit something while I'm in school.

I plan to move my 20K to a 2yr and 3yr Tax-free GIC with People's Trust (PT) earning 2.45% interest so I can get this back for my second to the last and final year in college.

I am also considering putting 10K to a 1yr or 15 month Tax-free GIC with PT earning 2.225% or 2.3%.

So I have another 10K left for the first year to pay tuition, books, and living expenses.

Just to note, I currently live with my parents and will no longer have to pay rent when I start school. I will probably only buy caffeine pills (no Timmy's) and protein powder to supplement my diet and moderate exercise so I'm a well-oiled learning machine.

Am I thinking about this the right way? Should I put all my money on a GIC? Should I consider putting less and putting away some for emergency funds?

The money will no longer be available when I put it in a GIC, if I understand this correctly. So I don't really have a lot of room for anything else that I haven't thought of.

I'm going to study some computer related diploma at Seneca.

The cost of my tution is 4k per year for the diploma. I'm getting my credits first before I go pursue a degree. I'm an immigrant (turned Canadian citizen recently) so my previous schooling isn't really going to help.

Books are 1.5k.

Transportation: I estimate to be 1200 to 1300 for the first year using GO Transit.

All in all that is 6.8K. So, I have 3.2k left for unaccounted expenses for the first year.

I just want to do this right and want to be debt/student loan free when I finish my diploma/degree.

I haven't researched OSAP. But I have a suspicion that they wouldn't really help me since they know how much I earned based on the income tax I submitted.

Forgive me for my formatting. I'm new to the forums.

Thank you for reading! I hope to learn a lot from you guys!
Congrats on the savings!

PT TFSA regular savings rate is 2.25% last I checked, you really don't get any real big basis point increase for locking your funds away for 2 or even 3 years.

20 basis points on 20,000 is $40 bucks a year, doesn't really make sense IMO to be locking in your funds unless you suspect another rate decrease.

Also inflation even in a tax free account is going to eat majority of that 2.25% away, start doing some research on investing, there are a ton of great topics covered in the forums to get started.
Deal Addict
Mar 8, 2013
2307 posts
1070 upvotes
If I understand your situation correctly, you are actually not in a position to invest your money but need to have it available over the next few years. You are correct that with most GICs, your money will not be available and that is a big negative. If you are willing to do a little work online, you can get better returns than with the GICs you mention with no risk. If you follow this forum and others, you will see that there are constantly new promotions that involve cash bonuses or special rates which are more attractive than GICs. For example, Tangerine had a promotion until March 31 that paid $100 if you transfer at least $5000 into their TFSA. Then Presidents Choice Financial offered 2.6% and BMO 2.5% for a few months. Now Zag Bank is offering $150 in bonuses if you open a new account and keep $200 in it for a year. My point is that if you lock your money in a GIC, you will not be able to take advantage of such bonuses. Just divide your money over a number of these promotions and in cashable GICs.
Deal Addict
Apr 6, 2008
2450 posts
366 upvotes
Toronto
books seem disproportionately expensive, but i guess its good to prepare for the worse

you didn't specify but are you going to still work part time?

looks like a solid plan to me
[OP]
Newbie
May 29, 2015
2 posts
Mississauga, ON
FoFai2015 wrote:
May 30th, 2015 7:15 pm
Congrats on saving that amount! GICs are only fine for a portion of your savings (sometimes you need cash quick), but some credit unions offer escalator GICs that offer a somewhat higher interest rate in the first two years and a higher one in the third. You can withdraw your cash early but you'll get lower interest, though still better than 0.8%.

You might also consider a GIC ladder. I wouldn't put the whole thing into the ladder, take some out and put it in a regular savings or TFSA savings account so, again, you can get cash quick if necessary. A ladder is generally a collection of one, two, three, four, and five year GIC. Every year, you roll over a matured GIC into a 5 year GIC. This way you can potentially get cash once per year, and it can avoid very low interest rates sometimes. (If you put cash into a GIC for a year when rates are low, and then they rise, next year you'll have some cash that you can invest at a higher interest rate.)


Thank you for the response! I thought no one was going to notice this thread. I will definitely consider how a GIC ladder will help! Hopefully there is that option under a TFSA investment.

Johnny0c wrote:
May 30th, 2015 7:49 pm
Congrats on the savings!

PT TFSA regular savings rate is 2.25% last I checked, you really don't get any real big basis point increase for locking your funds away for 2 or even 3 years.

20 basis points on 20,000 is $40 bucks a year, doesn't really make sense IMO to be locking in your funds unless you suspect another rate decrease.

Also inflation even in a tax free account is going to eat majority of that 2.25% away, start doing some research on investing, there are a ton of great topics covered in the forums to get started.


Thank you for the response! Can you point me on the right direction? There's too much information to sift through. I've filtered them and have been reading the most popular ones that are relevant to my situation. Most of them seem to be tailored to long-term investing. Based on my financial situation, I can only do short term so I can use them up in the ensuing school years.

akaManny wrote:
May 30th, 2015 7:59 pm
If I understand your situation correctly, you are actually not in a position to invest your money but need to have it available over the next few years. You are correct that with most GICs, your money will not be available and that is a big negative. If you are willing to do a little work online, you can get better returns than with the GICs you mention with no risk. If you follow this forum and others, you will see that there are constantly new promotions that involve cash bonuses or special rates which are more attractive than GICs. For example, Tangerine had a promotion until March 31 that paid $100 if you transfer at least $5000 into their TFSA. Then Presidents Choice Financial offered 2.6% and BMO 2.5% for a few months. Now Zag Bank is offering $150 in bonuses if you open a new account and keep $200 in it for a year. My point is that if you lock your money in a GIC, you will not be able to take advantage of such bonuses. Just divide your money over a number of these promotions and in cashable GICs.


Thank you very much for this valuable insight! I will allot a certain amount for flexibility to take advantage of the bonuses/promotions you mention. I'm just anticipating that in the future (because of school work) I'd have less time to manage my investments. I always can't be looking for these things when they pop up!

medalgo wrote:
May 30th, 2015 8:20 pm
books seem disproportionately expensive, but i guess its good to prepare for the worse
you didn't specify but are you going to still work part time?


I have been away from school for a while so I'll have to see if I can handle the load without requiring a lot of time. And about the books -- hopefully I can find 2nd hand ones or free ebooks.

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