There are some simple tools that can help us figure out where we might stash some cash for a while. Preferably within registered accounts like the RRSP, RRIF, or TFSA. In a non-sheltered account, the tax exposure will negatively impact net returns, so factor that into the thought process. Regardless of the pros & cons of holding cash over the long haul, we can find ourselves wanting to sit on some cash from time to time. If the cash just sits there as cash, it’s under constant attack from inflation. The starting number remains the same. But the purchasing power is evaporating daily. Let’s see how that works.

Go to the Bank of Canada’s Inflation calculator & plug in $10,000.00, starting in 2014, & hit the calculate button. As of today, that returns a value of $13,108.11. That extra $3,108.11 is how much our original $10k would need to have earned in interest, in order to buy the exact same basket of goods in October 2025. If we were sitting in cash, earning nothing, we’ve lost almost a quarter of our buying power. The Bank of Canada rates are based on an average basket of consumer goods that track the consumer price index. We’re not average, of course, so our personal inflation rate might be different! Believe it or not, Statistics Canada can help with this. With the Personal Inflation Calculator! Here we can plug in the things we spend our money on & the calculator will give us our personal inflation rate, based on our individual spending biases. Don’t get all hung up on the finer detail of the results here, you just want some idea if you’re in the ballpark of the CPI numbers that the Bank of Canada produces. Depending on what you spend your money on, you may generally be a little higher or a little lower. Knowing that is sufficient for a reasonable comparison against the Bank’s data. For the purpose of this exercise, we’re going to assume we’re close to the Bank’s numbers.

On a side note: are you being bombarded by online advertising on short term promotional rates? I just saw one for a 4 month rate of 4.75% from a local credit union. Nice, eh? And hey, if you’ve got the time, & some cash sloshing around in a regular bank account, nothing wrong with hopping around to benefit from these offers. In regular accounts, be careful doing this with large chunks of money, where the yield might bump income into a higher tax bracket. Or into OAS clawback territory. In sheltered accounts, I prefer to avoid all the extra work required to chase interest yield. In these accounts, I like to keep it simple.

And the simple thing to do is to buy a HISA style ETF. There are many of them, so take your time finding one (or more) that you like. I’m going to use the Purpose High Interest Savings Fund, ticker PSA, for this example. It trades in Canada, in Canadian dollars, & it’s eligible for registered accounts. Today, the net yield (after MER is stripped out) is 2.44%. That’s an annualised number based on the rate for the past 7 days, so you can’t take it to the bank (🤪) for the long haul. But this yield number makes for an easy first-pass comparison to whatever else you might be looking at. There may be better rates out there on other ETFs, so do some hunting for comparison. But PSA is one of the older HISA types ETFs around & we can see what its total return is since 2014. And that’s why I used 2014 in the Bank of Canada example above.

If you had invested the same $10k in this fund when it launched, back at the end of 2013, it’d be worth $12,723.00 today. That is only 385 bucks shy of the inflation indexed number from the BoC calculator. After almost 12 years, that is a whole lot better than the $3,108.11 we’d have seen evaporate if we’d let the $10k sit in cash. By all means, shop around & see if can find something that suits you better. There are many HISA type ETFs on the market now, like CASH, HSAV, etc. There are also money market funds that provide a similar smooth line performance to the HISA ETFs, take a look at ZMMK, MNY, CMNY, by way of example. You can use the Interactive PerfCharts from StockCharts to do the comparison. While bond ETFs will usually outperform these cash type ETFs over the long haul, they are subject to greater volatility than the HISA & money market funds. I’ve included a couple of popular bond finds in the link so you can see how they compare. They may outperform over time, but people don’t like to sell shares of a bond ETF after a crash. And bond funds tend not to recover as well as equity funds do after a crash. The other thing to bear in mind here is that old investing adage: past performance is no guarantee of future results! But leaving money sitting in cash guarantees inflation erosion.
Note – the link above has some of the ETF tickers already entered but the baseline time period is 200 days. Right click (or press & hold on a mobile device) the square at the bottom right of the chart where it shows “200 days” & select “All” from the menu that pops up. That’ll give you a longer timeline to look at.

Incidentally, owning a ladder of individual bonds is quite different to owning a bond fund. Buying individual bonds guarantees (for the most part!) that you’ll get your money back at the end of the term, along with getting the coupon payments en route. The mini-flash crash of some bond ETFs during 2020, & the bigger bond fund crash in 2022, have scared some investors into moving some of their hard-earned money into the more stable cash-like funds we are talking about here. You might need to talk to your financial advisor about how to balance across these products in your portfolio. But if you are going to hold some cash in interest bearing ETFs, some of these tools might help you evaluate your inflation exposure.

Purpose Investments Inc. also has a US currency fund – the Purpose US Cash Fund, ticker PSU.U. The current net yield on that is 4.03%, which could be useful if you have US dollars sitting around. And no, I am absolutely NOT suggesting that you go swapping your Canadian cash for US cash just to buy this for the better rate. There are a whole bunch of other considerations that surround currency exchange & conversion strategies. Learn how this all works before trying to play the currency game or it might cost more than it’s worth. But if you already have US cash sitting idle, an ETF like this might help offset the effects of inflation while it’s not being used.

I wish that interest rates could always be higher in our savings & investing accounts.
While being almost nothing on our car loans & mortgages! 😜

If you want to learn more about saving & investing, please check out Double Double Your Money, available at your local Amazon store.

Important – this is not investing, tax or legal advice, it is for entertainment & conversation-provoking purposes only. Data may not be accurate. Check the current & historical data carefully at any company’s or provider’s website, particularly where a specific product, stock or fund is mentioned. Opinions are my own & I regularly get things wrong, so do your own due diligence & seek professional advice before investing your money.