KEEPING OVER THIS AMOUNT OF CASH IN YOUR BANK ACCOUNT IS A SERIOUS MISTAKE — HOW MUCH DO YOU HAVE STASHED IN THERE?

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 (1). 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 (2) . 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% (3), 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.

Read more: Keeping over this amount of cash in your bank account is a serious mistake — how much do you have stashed in there?

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 get started, you'll need an online brokerage account. A good option that offers a robust suite of investor education tools is CIBC Investor's Edge. Open an account before March 31, 2026, using promo code EDGE2526 and get 100 free trades plus $150 or more cash back. (Terms and conditions apply.)

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.

A smart way to get easy, fast access to an emergency fund but not lose out on earned interest is to use a high-interest savings account (HISA). One of the highest-earning HISAs in Canada is offered by online-only EQ Bank. Open an EQ Bank Personal Account and earn up to 2.75% interest on every dollar deposited.

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.

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

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Statistics Canada (1); Forbes Canada (2); CBC (3); Spring Financial (4, 5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

2026-02-02T15:38:13Z