Investing
Cash & Cash Equivalents
Understand the role of cash, savings products, and short-term low-volatility assets in a financial plan.
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Cash in 30 seconds
Cash and cash-equivalent holdings generally prioritize liquidity, accessibility, and short-term stability rather than high long-term growth. Stable does not mean risk-free.
Common forms
What counts as cash or a cash equivalent?
Examples can include money in chequing or savings accounts, high-interest savings accounts, short-term deposits, GICs, and certain money-market instruments. “Cash equivalent” is a broad financial description—not a promise that every product is guaranteed, instantly accessible, or protected in the same way.
Practical roles
Why people hold cash
Liquidity
Money may be needed soon.
Emergencies
Accessible funds can support short-notice spending needs.
Short-term goals
Useful where preserving capital and access matter more than growth.
Portfolio stability
Cash may reduce overall portfolio volatility, depending on the holdings and context.
Important trade-offs
Cash is stable, but not risk-free
Inflation risk
Purchasing power may decline if prices rise faster than the money grows.
Changing rates and reinvestment
Rates paid on savings and deposit products can change; reinvesting later may occur at a different rate.
Institution and product differences
Access, terms, risks, and protections vary. A deposit, fund, and market instrument are not interchangeable.
Canadian context
Deposit insurance has conditions
CDIC protects eligible deposits held at its member institutions if a member fails, subject to current eligibility rules, insurance categories, and coverage limits. Not every product held at a financial institution is an eligible deposit. Mutual funds, stocks, bonds, and ETFs are not insured by CDIC.
Check current CDIC coverage guidanceDifferent jobs
Cash versus investing
Cash
- Priority
- Stability and accessibility
- Potential return
- Generally lower
- Typical horizon
- Shorter-term
Investments
- Priority
- Potential growth or income
- Risk
- Value may fluctuate
- Typical horizon
- Often longer
Neither is always better. The appropriate role depends on the goal, timing, need for access, and ability to accept risk.
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Key takeaways
What to remember
- Cash emphasizes access and stability more than long-term growth.
- Inflation can erode purchasing power.
- Product terms and protections differ.
- CDIC coverage applies only to eligible deposits at member institutions under its rules.
Related topics
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Sources & last reviewed
Official references
- Last reviewed
- August 2026
- Primary sources
- CDIC, FCAC, and Canadian Securities Administrators