Canadians like cash because it is liquid and convenient, but too many falsely believe it never loses value. Unfortunately, stocks, bonds and other types of investments don’t feel like a plausible alternative. Only a minority feel knowledgeable enough to invest or even comfortable making their own investment decisions.
Many Canadians understand that they hold more cash than is advisable, but that isn’t stopping some from making plans to sock away even more in cash deposits and savings accounts going forward. 45% said they had plans to add more money to the “mattress” and only 11% said they plan to take money out of it in the next year.
Canadians hold 60% of their portfolios in cash, which is double the amount they think they should.
Canadian men and women both consider themselves savers rather than investors, but the extent to which this is true varies significantly by gender.
The vast majority of Canadians identify themselves as savers, almost like saving is part of their DNA. But the habit of investing often starts early – encouraged by family, employers through workplace plans or by meeting an advisor. All these influences help to establish a positive mindset about investing.
Having a lot of cash on hand might sound comforting, even empowering to many investors — but too much cash can be harmful and has been a losing proposition in today’s low interest rate environment. By focusing on a few key priorities, Canadians can find a better balance between cash and other assets to achieve their financial goals.
Cash can be great for facilitating short-term financial needs, but not so much for longer-term goals such as building a nest egg for retirement. Figuring out what’s needed now versus what’s needed later may be a good start to reducing your cash pile.
Stay informed about the rules of thumb for holding cash in your portfolio by exploring the multitude of information and tools available online to investors. It’s all there, you just have to want it.
If you’re unsure what the right mix of cash and other assets is for your situation, explore an asset allocation tool or ask a financial advisor to help focus your goals.