This blog post is sponsored by Alterna Bank.

We’re firmly into the new year, and, for me (and maybe for you), 2019 is all about setting goals. Goals like saving for retirement, boosting my emergency fund, and saving for more home renovations.

While setting good goals is important, making a realistic plan to execute that goal is half the battle. For example, if your plan this year is to save $20,000 for a house down payment, that’s a great goal! But beyond just setting that goal, you need to make a plan to save that money. You’ll need to answer questions like:

• How much am I going to save every month to each my goals?
• Where am I going to put that money?

Where to put that money is a big question, because it effects how you are actually, literally, going to save your money.

This year, my savings goals involve restarting my retirement contributions, growing my emergency fund, and saving for my husband’s fourth semester of tuition. Yeah, I know, it’s a lot, and most of these goals are relatively short term, which means I need to keep the money in a short-term savings-goal-friendly-place. There are a few places to put savings goal money:

• A high-interest savings account
• A guaranteed investment certificate (GIC)

Each savings tool is appropriate for different savings goals and which one you choose is largely dependent on three factors: your risk tolerance for this money, whether you’ll need to access it on short notice, and your timeline.

High Interest Savings Accounts

A high-interest savings account is a good place to stash money for short term goals. There are plenty of options online that charge no fees, and the interest rates are decent. With an Alterna Bank high-interest savings account, you’ll earn around 2.35%*.

High Interest Savings Accounts Pros and Cons

Pros

• No fees or minimum account balances
• Contributions can be made frequently
• The money is accessible when you need it

Cons

• Not the highest available interest rate
• Easy to raid for impulse purchases

High-interest savings accounts are for savings goals that you contribute to frequently, money that you need access to in a moment’s notice, and money that you’ll need access to soon. Some examples include:

• Emergency funds
• Renovation funds
• Christmas or vacation funds

GICs

GICs are a great alternative to high-interest savings accounts because they offer slightly higher interest rates, so you get more bang for your buck. The way they work is that your money is locked in for a term, usually a period of between three months and five years, and at the end of the term your money is returned to you, plus interest.

For example, Alterna Bank offers a 2.35%* tax-free savings account, or 3.05% for an 18-month GIC. If you have thousands of dollars, this small uptick in interest rate will earn you more.

GIC Pros and Cons

Pros

• Higher interest rates
• Money is locked in for the term, making it harder to raid this account for impulse purchases

Cons

• Money is locked in for the term, so you can’t access it without forfeiting your interest
• Some GICs have account minimums
• You must invest a lump sum at once

GICs are ideal if you have a lump sum of money that you won’t need for a few months. For example, I’m saving to pay my husband’s final semester of tuition. I should have the money saved soon, but I won’t need to pay the tuition until June. I could invest the $4,500 into a three-month GIC and earn a higher interest rate than I would if I left that money sitting in a high-interest savings account.

Investments

Finally, you could choose to invest your money, either through your local bank, a robo advisor, or a discount brokerage. Investments have the benefit of earning a higher rate of return, but they’re also more volatile and there is a chance you could lose some of your initial investment when the market corrects. For this reason, you should only consider investing your money if your time horizon for that money is longer than five years.

Personally, most of the time I opt for a high-interest savings account, because most of my savings goals are reached in the nick of time, and I don’t have a lot of time to let the money sit and earn me interest in a GIC. That said, this year may be the first year I actually get ahead of my savings goals, and I’m excited to possibly use GICs to make my money work for me.

What about you? When do you use high-interest savings accounts versus GICs? I want to know!

*Interest is calculated daily on the closing balance and paid monthly. Interest rate is annualized and subject to change without notice.