Where to keep your money, depending on when you will need it

The right place for a sum of money depends less on the product than on when you will need it. Money you will spend next year and money meant for your retirement in twenty years should not be treated the same way, and mixing the two is a common source of mistakes.

An emergency fund, before anything else

Keep six to twelve months of expenses in cash, for example in a high-interest savings account, so that you can face a job loss, a repair or an unexpected expense without having to sell investments at a bad time. This money is not meant to earn much; its role is to be available.

Less than two years: projects you can already see

If you know you will need a sum within the next two years, for a car, furniture or a trip, keep it on a high-interest savings account or in a term deposit such as a GIC. Over such a short period, the stock market can fall without having time to recover, and the risk is not worth taking.

Two to five years: the tricky zone

This is where the decision is least obvious. Investing in the stock market for three or four years can work, but a downturn at the wrong moment can leave you with less than you put in just when you need the money. Depending on how you would feel about a temporary loss, you can keep this money in savings, invest it, or split it between the two.

More than five years: long-term savings

Money you won't need for at least five years, and even more so money that is almost certainly for retirement, can be invested in the markets. Over long periods, staying invested has historically worked better than trying to buy at the right moment, because nobody can reliably tell when the market is at a high or a low. For most people, a broadly diversified, low-cost investment held for the long term does the job, provided it is placed in the right accounts.

In Canada, that usually means filling the tax-advantaged accounts first: the TFSA, where growth is tax-free, the RRSP, which is most useful when your tax rate is high today, and depending on your plans the FHSA for a first home and the RESP for your children's education. The guide on where to save in your first years in Canada goes into the order in which to use them.

If you already have a large sum to invest

If you have significant savings sitting in cash, you don't have to invest everything on the same day. Entering progressively, for example by investing a twentieth of the amount each month over twenty months, or half now and the rest over the next two years, reduces the risk of investing everything just before a fall. It may earn slightly less on average than investing everything at once, but it is often easier to live with.

General information, current as of October 2026; not investment advice. Past returns do not guarantee future returns.