Start With the Right Mental Model
You might be holding cash for a home purchase, taxes, a large planned expense, a portfolio reset, or simply clarity on your next move. In those moments, the goal isn’t growth or yield optimization. It’s capital preservation, liquidity, and earning some interest while you wait.
That’s exactly what Canadian cash and money-market ETFs are built for. Think in layers of risk, not products:
Cash ETFs → stability, ~2%-3%
Short-term bonds → modest volatility, ~4–5%
Equities → growth + income, no capital preservation
Each step up is not “free additional yield.” It is a conscious trade-off. This guide focuses on layers 1 and 2, where capital preservation remains a priority.
Timeline: How Long Is This Money Really Parked?
The most important decision when parking cash isn’t the ETF — it’s the timeline. Cash ETFs are designed for waiting, not for medium- or long-term investing.
Cash Parking by Time Horizon
Time Horizon | What This Money Is | Appropriate Approach | Key Insight |
|---|---|---|---|
0–6 months | Near-term spending money | Cash ETFs / money market | Liquidity matters more than returns |
6–18 months | Money in transition | Cash ETFs | Earn interest while waiting |
18–24 months | Upper limit for cash-like tools | Cash ETFs ± short-term bonds | Opportunity cost starts to matter |
3–5 years | Medium-term capital | Invested portfolio (not cash) | Volatility becomes acceptable |
5+ years | Long-term wealth | Growth assets | Cash becomes a drag |
Framing that matters
This guide is really about 6–18 months
18–24 months requires intention
5 years is not cash — it’s investing territory, where portfolios can reasonably double over a market cycle
If you’re holding cash that long, the question is no longer where to park it — it’s why it isn’t invested.
💡 Did You Know?
Holding excess cash beyond ~18–24 months is usually a timeline problem, not a product problem. At that point, opportunity cost becomes more important than safety.
Cash ETFs (The Baseline)
Cash ETFs behave like cash.
Pros:
👍 minimal volatility
👍 daily liquidity
👍 interest as the only return
They are ideal for short holding periods, parked capital, and portfolio pauses. This is your reference point, not your return engine.
A Quick Note on HISAs (High-Interest Savings Accounts)
High-Interest Savings Accounts (HISAs) also belong in this layer and are worth mentioning.
Online banks and digital platforms sometimes offer attractive rates to attract new customers. The trade-off is that your cash typically needs to sit outside your brokerage, inside a digital bank account.
For example, Wealthsimple has offered a 2.25% interest rate on its cash account at some point (check each banks for thei daily rates).
The difference in practice:
HISAs are simple and safe, but add friction if your money is already invested
Cash ETFs keep your cash inside your brokerage, tradable and deployable at any time
Bottom line:
HISAs are a perfectly valid option for parked cash outside investment accounts. Cash ETFs exist for investors who need to park cash in investment accounts.
Safe Cash ETFs in Canada — Tax Treatment & Approximate Yield
Here are some examples to consider. Many ETF providers have offering you can chose from. CASH appears to be popular from what I see but I prefer ZMMK as it pays a little more.
ETF | Structure | How Returns Are Paid | Approx. Yield* | Tax Treatment (Non-Registered) |
|---|---|---|---|---|
Global X High Interest Savings ETF (CASH.TO) | High-interest savings deposits | Monthly cash distributions | ~2.3–2.5% | Interest income |
Purpose High Interest Savings ETF (PSA.TO) | HISA + short-term government bills | Monthly cash distributions | ~2.0–2.2% | Interest income |
BMO Money Market Fund ETF (ZMMK.TO) | Money-market (gov’t + high-quality corporate) | Monthly cash distributions | ~2.5–2.8% | Interest income |
Global X Cash Maximizer ETF (HSAV.TO) | HISA (non-distributing) | NAV increases instead of distributions | ~2.5–2.6% | Capital gains |
*Yields are approximate and variable; they move with short-term interest rates.
Tax Reality (Straightforward)
CASH.TO, PSA.TO, ZMMK.TO → distributions are interest income, taxed at your marginal rate in taxable accounts
HSAV.TO → no interest distributions; returns are realized as capital gains when sold
In TFSAs and RRSPs, this distinction largely disappears since interest is sheltered.
A Note on GICs: Safe, Predictable — but Not Liquid
Guaranteed Investment Certificates (GICs) are another safe way to park cash in Canada, especially when issued by major banks or CDIC-insured institutions.
They:
👍 protect principal
👍 offer a known rate of return
👍 often pay more than basic savings accounts
The trade-off
⚠️ your money is locked in
⚠️ early access usually means penalties — or no access at all
Bottom line:
GICs trade liquidity for certainty. Cash ETFs trade a bit of certainty for access and control.
Short-Term Bonds (The First Real Step Up)
Short-term bond ETFs add a small amount of risk to earn more than cash while still prioritizing some level of capital preservation.
While bonds have capital preservation at maturity, it’s not a liquid option and the liquid option is the secondary market which is impacted by interest rate movements. You could buy bonds directly but it’s a bit more complicated than ETFs.
Choose your trade-off as you can have better yield than money market ETFs but you trade liquidity or potential capital preservation.
Short-Term Bond ETF Options — Canada
ETF | What It Holds | Target Yield (Range) | Main Risk | Tax Treatment |
|---|---|---|---|---|
XSB.TO | Short-term government + investment-grade corporate bonds | ~4.0–4.8% | Limited interest-rate risk | Interest income |
ZSB.TO | Similar short-term bond exposure | ~4.0–4.8% | Limited interest-rate risk | Interest income |
VSB.TO | Shorter-duration Canadian bonds | ~4.0–4.8% | Limited interest-rate risk | Interest income |
*Yields are approximate and variable; they move with interest rates.
What Is Not Capital Preservation
Even if income-oriented, the following do not qualify as cash-parking tools:
dividend equity ETFs
covered-call ETFs
REITs
preferred shares
They belong in income or total-return portfolios, not in the cash equivalent part of your money management. The bucket strategy for retirement income is how cash and bond ETFs fit.
Bottom Line
This is not about maximizing yield. It’s about keeping capital safe and liquid while earning something — while money is in transition.
Cash is a pause, not a plan. Use it deliberately, understand the timeline, and know when it’s time to move on.