Stuck in Cash

Cash is convenient but not necessarily safe
Canadians want to save enough money to live a comfortable retirement, but their propensity for sitting on cash isn’t helping them achieve this goal. The average Canadian has the majority of his/her money in cash products because it is convenient and feels safe but few consider that cash has lost value over time due to inflation and low interest rates. Although recognizing they have more cash than ideal, the alternative, to invest their money, sends many into unfamiliar territory that can be scary. 51% of Canadians associate investing with “gambling” and only 35% feel knowledgeable about investing. Getting unstuck requires stepping away from what is familiar and maybe reaching out for help.

False Sense of Security

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.

    Cash appeal

  • 46% Cash is liquid – I can always take it out easily
  • 33% It is convenient
  • 24% I don’t want to risk losing money

    Investing Barriers

  • 51% Agree: Investing is like gambling. It is convenient
  • 44% Agree: I am comfortable making my own investment decisions. I don’t want to risk losing money
  • 35% Agree: I am knowledgeable about investing

Cash Habits Die Hard

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.

Identity Crisis?

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.

Get off the Sidelines

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.

01.
The Long and Short of it

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.

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02.
Be A Sponge

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.

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03.
Don’t Be Afraid to Ask

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.

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* Canadians with $150,000 or more in wealth and investments.