Financial Channel

Like most people I keep some of my cash in GICs.

Not knowing when the banks will increase their savings rates, I've always fussed over being "trapped" in a lower yielding GIC when the current prevailing rates are much higher - ie. 3 weeks after you lock up your money for 6 or 9 months, the bank raises its rates, so you end up losing out some of the interest in the end.

So I devised a strategy (fashioned after the idea of bond laddering) that allows me to not only avoid locking up my money at lower rates, but also collect the accumulated GIC interest on a monthly basis (without having to buy lower yielding GICs that pay out monthly).

Here's what I do. And I'm using ING Direct's short term (3 month) GICs to accomplish this:

Divide the amount you want to invest into 3 equal parts.

Invest the first part toward the end of the month.

Invest the second part toward the end of the next month.

Invest the third part, again a few days before the end of the third month.

Instruct the bank to roll over the principal when each GIC matures, but transfer the interest to your ISA account.

This way,

- if ING raises its rates, you don't end up waiting for 2-3 months before your money starts taking advantage of the new rates,

- you don't have to wait for 3 months before getting your hands on the accumulated interest

- you remain partially liquid

- collect higher interest than what's being offered through an ISA account


I know, not a brand new groundbreaking idea, but neat nonetheless.

Thanks for typing it up. I was looking for something like this.

http://www.ingdirect.ca/en/artofsavi...gyourgics.html