Why Keeping Cash in a Savings Account Can Be Costly
Keeping money in a savings account may feel safe, but over time it can quietly reduce your wealth. While savings accounts are useful for short-term needs, relying on them long term can come at a cost.
Inflation reduces purchasing power
Inflation increases the cost of living over time. If your savings account earns less than the inflation rate, your money loses real value, even though the balance looks the same or slightly higher.
Low interest rates limit growth
Most traditional savings accounts offer low interest. This means your money grows slowly and may not keep up with rising expenses or long-term financial goals.
Taxes reduce returns
Interest earned in a non-registered savings account is fully taxable, which further reduces your net return after tax.
Missed investment opportunities
Money sitting in cash is not working for you. Investing through TFSAs, RRSPs, or other investment vehicles can provide higher long-term growth potential.