Does the trade war have you anxious about your savings? Where to safely store your cash

It’s worth sorting out now, before a market shock forces a rushed decision. Here’s how to confirm your cash is protected, and which of the three most common cash options — a high-interest savings account, a money market fund or a GIC — fits your timeline and risk tolerance.

Is your cash actually insured?

Before moving a dollar, confirm the institution is a member of the Canada Deposit Insurance Corporation (CDIC), a federal Crown corporation that insures eligible deposits at its member banks, federally regulated credit unions and trust companies. CDIC coverage protects eligible deposits up to $100,000 per coverage category, per member institution — so spreading savings across different categories or institutions can multiply your protection. A full list of member institutions is available on the CDIC website.

Coverage applies to chequing and savings accounts, GICs and other term deposits of any length, whether the money sits in a registered plan such as an RRSP or TFSA, or outside one. If a member institution fails, CDIC contacts eligible account holders and reimburses principal and interest within days.

None of that protects you from inflation, though. Canada’s annual inflation rate was 3% in July, meaning cash earning less than that is quietly losing purchasing power.

Where’s the best place to park it?

Three mainstream, CDIC-eligible options can help cash keep pace with inflation, each with a different tradeoff between yield and liquidity.

High-interest savings accounts

The most liquid option: Transfer cash in when you need it, transfer it back out just as fast. Annualized yields on high-interest savings accounts currently range from 2% to 2.8%, though rates are variable and can change daily, and the top rates are often reserved for large balances or short-term promotions.

Money market funds

These mutual funds hold highly liquid, short-term debt and can usually be cashed out within a day. Yields currently sit between 1.5% and 2.3% annually — but the funds also charge a management expense ratio (MER) that can top 1%, which eats into the return. A well-managed fund can still beat a savings account; a poorly managed one won’t.

GICs

For a higher rate, guaranteed investment certificates require locking cash away for a set term. The best one-to-five-year GIC yields currently range from 3.7% to 4.25%. Laddering GICs — staggering maturities across different terms — keeps some cash coming free on a regular basis while still capturing the higher rate.

What CDIC won’t cover

CDIC insurance doesn’t extend to stocks, dividends, mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs) or bonds. Foreign currency deposits are insured, but only in Canadian dollars, and cryptocurrency holdings aren’t covered at all.

In other words, moving out of equities and into a fund that holds bonds doesn’t get you CDIC protection just because it feels defensive. The insurance is specific to deposit-type products at member institutions.

What to do first

Before assuming a trade-war cash cushion is protected, check three things:

• Confirm your institution is a CDIC member
• Check whether your balances fall within the $100,000 coverage limit per category, and split funds across institutions or categories if not
• Match the product to your timeline — a savings account for cash you may need soon, a GIC for cash you can lock away, a money market fund for something in between

The trade war may keep rattling markets for a while yet. A cash allocation that’s actually insured, and matched to when you’ll need the money, is a more useful hedge than cash sitting in the wrong place, earning the wrong rate.