Too much cash in your bank account is costing you — here's what Canadians need to know

But plenty of Canadians haven’t made that move — and the ones sitting on excess cash in standard chequing accounts are quietly falling behind.

Inflation reality check

Canada’s annual inflation rate climbed to 3.2% in May 2026 — the fastest rate since December 2023, driven largely by energy prices surging in the wake of the Iran war.

Now consider what your money earns sitting in a standard chequing account at one of Canada’s Big Six banks. Most major banks’ chequing accounts pay 0% interest. Even among digital banks and fintech apps that do offer interest on day-to-day accounts, rates typically range from 0.01% to roughly 0.1% — a return far lower than the rate of inflation.

The result: every month you leave excess money sitting in a low-yield account, inflation is quietly eroding its purchasing power. A dollar today buys less than it did a year ago — and if your cash isn’t growing, you’re effectively losing ground.

But inflation isn’t the only cost of holding too much idle cash. There’s also the opportunity cost — all the potential growth you leave on the table by choosing not to invest in assets that can generate real returns over time.

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So what’s the right amount?

That said, some cash on hand is essential. You don’t want to be forced to redeem investments during a market downturn because a pipe burst in your basement, your car gave out, or you suddenly lost your job. And you definitely don’t want to put those costs on a credit card — where the standard Canadian rate sits around 19.99% to 25.99% APR on most general-purpose cards.

The standard advice from most financial planners is to keep an emergency fund covering three to six months of essential living expenses — enough to cover the basics (housing, food, utilities, insurance, debt payments) if your income disappears.

But personal finance expert Suze Orman has been pushing the general public to think bigger. In a December 2025 blog post, she urged her readers to aim for eight to 12 months of emergency savings, writing: “There are signs the economy may be losing steam. That’s not a prediction. It’s just a reminder that recessions or climbing unemployment don’t tell us six months in advance that they are on the way. We need to be prepared.”

Orman’s updated recommendation isn’t excessive — it reflects the reality that job searches can take longer than expected, especially in a slowing economy. And her guidance applies just as squarely to Canadians. If you’re self-employed, a sole earner or in a volatile industry, a larger buffer may give you the breathing room you actually need.

To calculate how much cash you need in reserve, add up your essential monthly expenses —rent or mortgage, groceries, utilities, transit, insurance and minimum debt payments — then multiply by the number of months that feels appropriate for your situation. Alternatively, look at your after-tax monthly take-home pay and multiply by your target number of months.

As with most money decisions, this is a balancing act. Too much cash drags your long-term finances down. Too little leaves you exposed. The goal is finding the right number for your life — and then putting the rest of your money to work.

Where to park the rest

Once you’ve calculated your emergency fund target, any cash beyond that threshold should be working harder for you. Canadians have a few particularly powerful tools for this:

High-Interest Savings Accounts (HISAs): If you need near-term access to cash — say, for a purchase in the next 12 months — a HISA is a strong first move. These accounts at online banks and credit unions currently offer rates between 2% and 3%, well above the rate on a standard chequing account, with your principal protected by Canada Deposit Insurance Corporation (CDIC) coverage up to $100,000 per insured category.