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Vishesh Raisinghani
Updated Jan 23, 2026
Cash is king, right?
Well, not always. Sometimes you can have so much cash sitting around in your bank account that it turns into a wealth-devouring demon.
On average, a Canadian adults has about $36,535 in the bank accounts, according to data released by Statistics Canada. For most people, that balance is simply too high.
Here’s why keeping too much cash on hand could be a serious mistake and a significant drag on your financial health.
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The inflation tax
Many chequing accounts offered by Canadian banks earn no interest at all, according to an analysis from Forbes Canada. That means your money isn’t keeping up with the rate of inflation.
But what does that actually mean? It means that while your money sits collecting little to no interest earnings in your bank account, the cost of goods and services creeps up. As a result, you'll need to spend more of your money to pay for the same goods and services. For instance, if you put $100 into a no-interest bank account in September, when the inflation rate hit 2.4%, it would take about 29 for the value of that $100 to be cut in half.
But inflation isn’t the only problem. Idle cash also carries opportunity cost — the money you leave on the table when you don’t invest in assets that can generate income or growth.
What to do with cash instead
To fight inflation, consider moving some of your money into short- or medium-term securities with higher yields.
For example, the Manulife Money Market Fund F has a distribution yield of 3.71% with a low risk assessment (4). Another low risk is the BMO Money Market Fund which offers a monthly distribution frequency and a yield of 2.60% (5).
Money market funds aren't your only option. Index funds — or exchange-traded funds (ETFs) that track the index — are excellent options for set-and-forget buy-and-hold investments. Just ask Warren Buffett, who has championed this investing philosophy for more than four decades.
To be fair, past performance doesn’t guarantee future returns, but the point stands: Keeping cash idle means missing out on growth.
Investing your cash in a diversified portfolio generally beats letting it sit in a chequing account. But that doesn’t mean you should drain your balance completely. There’s still a healthy amount of cash you’ll want to keep on hand.
To start investing, consider making contributions to tax-advantaged accounts, such as your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).
These accounts can hold many assets such as cash, individual stocks, mutual funds or low-cost exchange-traded funds (ETFs). Consider opening a discount brokerage account, like CIBC Investors’ Edge, so you can enjoy low commissions on trades and no or minimal account maintenance charges, depending on the size of your portfolio.
With a Regular Investment Plan, you can schedule automatic purchases of stocks, exchange traded funds (ETFs), or mutual funds at intervals that suit your budget. It’s a simple way to stay disciplined — investing a little at a time, without having to watch the market or stress over timing.
Because it’s a self-directed account, you stay in control of every decision, from what you invest in to how often you contribute.
Enjoy low commission fees of $6.95 per trade and no annual fees for the first year. Investors who make over 150 trades in a quarter fall in the active trader category — and can enjoy a discounted commission rate of $4.95 per trade for stocks and ETFs.
Get 100 free trades when you open a CIBC Investor’s Edge account using promo code EDGE2526. Plus, get $150 or more cash back.† Offer ends March 31, 2026.
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If you want to take the guesswork out of doing it alone, a platform like Wealthsimple Invest offers an easy, hands-off way to grow your money.
Their pre-built portfolios are tailored to your retirement goals, risk tolerance and investment horizon, so whether you’re saving for retirement, a home or building long-term wealth, there’s a portfolio that’s right for every investor.
Expert-managed and designed to weather market ups and downs, Wealthsimple takes care of the heavy lifting: automatic contributions, dividend reinvesting and smart rebalancing keep your investments on track.
You can invest through RRSPs, TFSAs or non-registered accounts, all from an intuitive online dashboard or their easy-to-use mobile app.
Trusted by more than 3 million Canadians, Wealthsimple manages over $100 billion in assets and provides $1 million in eligible coverage through the CDIC for chequing accounts and CIPF for investments. Plus, as licensed fiduciaries, Wealthsimple's advisors must put your financial interests first.
As a Moneywise reader, get a $25 bonus when you open your first account and fund at least $1 within 30 days.
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How much cash should you keep?
Cash remains your best source of emergency funding. If you suddenly lose your job, face an unexpected medical bill or need a quick repair on your car, you’ll want fast access to some funds.
Most financial advisors suggest keeping an emergency fund worth three to six months of essential living expenses. To find your target, total up what you spend on necessities in an average month, then multiply by three or six.
Another approach is to multiply your after-tax monthly income to build a short-term buffer if you lose your job.
Consider parking this cash in an account that pays you a higher interest rate than a regular savings account — so that your idle cash can continue to make you money.
For example, open a personal account with EQ Bank and in just a few minutes you get access to the best features of a chequing account combined with a high-interest savings rate.
When you fund your account and set up a direct deposit, you can earn 2.75% on every dollar deposited into the account.
The account has $0 monthly fees and no minimum balances. Plus, you can withdraw from any ATM in Canada — for free.
As with most money matters, cash management is a balancing act. Too much cash will drag your finances down and limit your ability to generate wealth, but too little can leave you vulnerable when life throws you a curveball.
Find the right balance that keeps you — and your family — both secure and growing.
— with files from Rebecca Holland
Vishesh Raisinghani
Freelance contributor
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He is the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms His work has appeared in Money.ca, Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine, National Post, Financial Post and Piggybank. He frequently covers subjects ranging from retirement planning and stock market strategy to private credit and real estate, blending data-driven insights with practical advice for individuals and families.
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