Best Short Term Investments in Canada 2024

The best short term investments in Canada continue to reward GIC customers, as well as those interested in the new EQ Notice Account. It’s tough to beat a zero-risk guaranteed 3.05%+ return on your cash!

Of course GICs aren’t the only safe, short term investment option in Canada. If you can’t stomach putting your money away for a full year to make use of a GIC, then Canada’s best high interest savings accounts are where you would want to look.

So, what makes a short term investment different from a long term investment? The main difference is how quickly you can convert that investment into cash.

With a short term investment, you want to be able to liquidate the investment to use within five years or less. You can also read our fixed income faceoff guide where we compare GIC vs. high interest savings accounts.

Fixed Income Comparison: Bond vs GIC vs ETF

Personally, I think that the GIC ladder offers the most value at the moment. It also has the advantage of being the most directly insured product.

What to Look for in Short Term Investing Opportunities

When it comes to the best account for short term savings you consider the following factors:

Accessibility

The first thing you need to be mindful of is accessibility; how easily can you get to your money when you need it? Some investment vehicles allow you to lock away your money for a set amount of time to earn a higher interest rate. 

While this method might be smart in some situations, it isn’t good for everything, so plan accordingly. If you have a set date that you need your money by, then this tactic could work well for you and allow you to earn more.

However, if the timeframe for your goal isn’t concrete, then you want to choose an option that allows for more liquidity so you can access the funds as needed without the risk of penalty. 

Level of Risk

The second thing you will want to consider is what is your level of risk for your short term cash investments? Of course, we all want to earn as much as we can on our money to see the best returns. However, short term investing also means you don’t have as much recovery time should there be a dip in the market. 

For those saving for a specific goal, this could backfire in a very bad way. For this reason, it’s recommended that your short term saving strategies take a safer and lower-risk investing approach.

While investing is never fully ‘safe’ there are plenty of options for safe and even guaranteed short term investment options in Canada which will be discussed in more detail below. 

Interest Rates

Don’t forget to consider the earn rate (interest or investment returns). The goal is to find short term high interest investments in Canada while also mitigating the risk.

This is a balancing game and each investor will approach this based on their own levels of comfort. However, again, there are some safe short term investment strategies that will allow you to earn a decent interest rate with very little risk involved.

Stability

Short-term investments don’t have as much time to correct themselves should there be a dip in the market. For this reason, if you are choosing to invest you want to invest in something that has a stable history. Not something that fluctuates too much.

Oftentimes this means not jumping on the latest ‘hot’ stock that everyone is talking about, as tempting as it can be. 

Low Cost

Last but not least, you’ll need to factor in how much your investment is going to cost you. After all, investing isn’t free. Even if you take a DIY approach rather than relying on a financial advisor or even robo advisor, there are still going to be some fees involved.

This is especially important right now as the yields on many short-term investments are at an all-time low thanks to the current economic situation due to the pandemic.

Top Short Term Investment Ideas for Canadians

So, what are the best short term investment options right now for Canadians in 2024? Here are our picks based on the factors listed above.

The EQ Notice Account

In June 2024 the EQ Notice Account shifted the conversation when it came to talking about short term investments for Canadians.

Suddenly the idea of having to choose between a GIC and a High Interest Savings account was gone. The Notice Account is what you get if a GIC and HISA had a kid together. It’s super easy to use, and snags an excellent interest rate – while giving very solid liquidity options.

Here’s the basic idea:

• The EQ Notice Account is new to Canada – but it’s based on a model that is very popular over in the UK (so it’s not like it’s risky just because it’s new for Canadians).
• Your money is fully insured by Canada under the CDIC – just as if it were in a GIC or high interest savings account.
• You select either a 10-day or 30-day option from within your EQ account, and then enjoy the corresponding interest rate.
• If you need your cash out before the end of the 10 or 30 days, you can get it at quickly – but you’re going to sacrifice the interest you would have earned.  
• Due to the nature of the Notice Account, I don’t think any other savings account in Canada is going to be able to match it over the long term.

High Interest Savings Account

A high interest savings account is a step above the savings account. This means you will be able to earn more interest on your money, however, there are also typically more rules surrounding the account that make your money slightly more difficult to access than a basic savings account.

Things to be mindful of with high interest savings accounts include the number of free monthly transactions you are allowed and if there is a minimum deposit requirement. Online banks tend to have the best rates and fewer requirements, however, they also make it a bit more difficult to access your funds immediately. 

Another thing to consider with high interest savings accounts are the rates and whether it is a firm rate or a promotional rate. Many banks will tease a high rate to get clients, but the rate only lasts a couple of months before dropping to a significantly lower number.

If your savings goal falls within that promotional time frame (often 3-6 months) then it’s worth taking advantage of. If not, then stick to the banks with the best overall rate. For example, right now EQ Bank offers a steady rate of 3.50% which is currently the best in Canada. 

Pros: safe and guaranteed, higher rates compared to general savings accounts.

Cons: some transactions can incur fees, possible minimum deposit requirement, can be a little more difficult to access your funds immediately .

Guaranteed Investment Certificates (GICs)

GICs are considered to be one of the safest investment options for Canadians. This is because the bank or financial institution that sells the GIC is legally obligated to return not just the investor’s principal, but also the interest.

While there are different types of GICs, some of which are a bit riskier than others, a typical GIC has no risk involved which means that you can invest your money and know exactly how much you will get in the end.

The catch with GICs, however, is that your investment must be deposited for a certain amount of time. How long you choose to invest in a GIC for is up to you. You can get a GIC for one month or up to several years.

The longer you keep your money in a GIC, the higher rate of return you will be offered. If you break your terms and need the money sooner, you will be faced with a penalty that can include fees and having some or all interest earned revoked. 

Most people use GICs for 1-5 year investments and most financial institutions that offer GICs have a minimum deposit requirement. Visit our best GICs in Canada article for our choices based on the time period you prefer.

Pros: safe and guaranteed, decent interest rates especially for longer terms.

Cons: Your money is not accessible until the term is over and there will be a minimum deposit requirement. 

Here are EQ Bank’s current GIC rates for 2024 compared to Tangerine’s – 2 of the best Canadian online banks:

Are there any shorter-term GICs available in Canada?

In Canada, term or time deposits traditionally referred to lending money to a bank for a period ranging from 3 to 9 months. On the other hand, GICs (Guaranteed Investment Certificates) were typically associated with durations of one year or longer.

However, Canadian banks have since expanded their offerings to include GICs for shorter spans such as 3, 6, and 9 months, bringing the two terms closer together in meaning. As you can see in the table above, EQ is offering very competitive rates for those shorter time periods as well.

Today, it is not uncommon to find 1-month or 2-month term deposits in Canada, although similar short-duration GICs are rarely promoted. Regardless, the distinction is nearly moot due to the rise of high-interest savings accounts and cash ETFs, which offer similar benefits.

The downside to very short term GICs (less than 3 months) is that if you want to maximize your rates you’ll have to pick a smaller, less known institution. While this carries some risk, for small amounts of money it should be safe enough – just make sure to read the fine print and verify your funds are insured.

For 1 or 2 months GICs the highest offer as of May 2024 belongs to VersaBank at 4.30% for both. If you want a safer option, out of the 6 big banks RBC is the best with 2.80% and 3.05% respectively.

Tax-Free Savings Account (TFSA)

Finally, let’s talk about your TFSA. This is one of the best investment vehicles for your short term investments since you don’t have to pay tax on investments held in this account. 

What’s key to understand about the tax free savings account is that it might be more accurate to call it a TFIA – Tax Free Investing Account. It’s NOT an investment in and of itself, but instead it is a a tax-shelter for other investments.

For example EQ Bank now offers an excellent short term investment option for Canadians by posting a TFSA interest rate of up to 5% by placing your GIC investments into a TFSA account.

TFSAs are incredibly flexible and offer a range of options from saving to investing. If you are thinking you want to invest in stocks, bonds, or ETFs then this is the ideal account to do that in. If you want to invest for more of a longer term goal, then we’d recommend checking out our comparison of Canada’s best online brokerages. These platforms allow you to explore all of the investment options available for TFSA investors.

Of course even relatively safe investments such as Canadian dividend stocks likely carry more risk than you’re after if you’re looking for short term investments. Risk and long-term returns are correlated after all.

One of the things you need to be mindful with is your TFSA contribution limit. While this expands every year, you need to be careful to follow the rules of this government-regulated account or risk being penalized.

Pros: tax-free, flexible and can hold many types of savings and investments.

Cons: have to be mindful of the contribution limit, if you choose to invest in higher risk investments then you can lose the money you meant to save.

Money Market and Cash ETFs

While money market ETFs have always been around, Canadian Cash ETFs were relatively new to the scene in 2023. The basic idea is that through the super convenient mechanism of buying an ETF, you can send your money to a fund company – which will then pool your money with that of other Canadians, and negotiate with Canada’s banks to get the best deal on what is essentially a massive high interest savings account. For the full details you can read the in-depth article we wrote on the Best Cash ETFs in Canada.

There has been some controversy in regards to the Cash ETFs that no longer issue new units vs the ones that do (especially in regards to the Horizons Cash ETF products) so make sure you read the fine print there.

I think that Cash ETFs are a great short-term investing tool but it should be noted that unlike purchasing a GIC, these investment products do not include CDIC insurance. Their interest rate is also free-floating, so it can go down in a hurry, unlike GICs which are “locked in” for whatever length of time you purchase them for.

Short Term Investing in Canada – FAQ

Best Short Term Investments with Low Risk & High Returns

Even with interest rates trending down slightly, short term investing in Canada continues to dominate headlines in 2024. Given that we lived through two decades of decreasing interest rates before the pandemic, it’s no surprise to see folks excited about being able to lock in a guaranteed 5%+ on their money.

By understanding the differences between popular short term investments such as GICs, Bond ETFs, Cash ETFs, high interest accounts – and now the new Notice Account from EQ – makes it all seem a bit less intimidating. It also lets you select the option that fits your unique goals and time horizons.

For example, if you want a place to park cash for a safety fund, a mix of the 10-day and 30-day Notice Account options might make the most sense, whereas saving for a downpayment might be more fit for a 2-year GIC.

All of that said, I should also point out that as popular as these short term investments are at the moment, all of these options trail the returns in both the Canadian and American stock markets by pretty significant margins. So, I wouldn’t be too eager to prioritize short term assets at the risk of taking away from long term investments.

I should also note that while meme stocks and cryptocurrencies that you don’t plan on hanging on to might technically qualify as a short-term investment, I think it’s more accurate to place those types of investments in the “speculation” bucket.  Aka – the gambling pile.

As they did in 2022 and 2023, EQ continues to dominate the short term investments scene in 2024. They just continue to build strength upon strength when it comes to offering excellent high interest rate products. It’s crazy to me that people still fall for the old “here’s a teaser rate for three months” marketing strategy when EQ so consistently offers a better product (and on a more user-friendly platform).