Cady, born Katie McClain, was born and raised in southern California. She began her career at the age of nine, with the popular commercial, I Am Stuck on Band-Aids. Other commercials followed, as well as appearances on such television series as Cheers, St. Elsewhere and Lou Grant. Her early film credits included playing Peter O'Toole's daughter, Tess, in My Favorite Year; and tap-dancing, 1930s style, on a white piano, in Pennies From Heaven.
She arrived in New York at age 17, when a workshop production of Judith Viorst's Happy Birthday and Other Humiliations moved east for pre-Broadway tryouts. Despite its limited run, Cady received good reviews and doors began to open for her in the city. A role in an episode of Spenser: For Hire was followed by a leading role in the television movie, A Father's Homecoming. In addition, she appeared in the independent film, Simple Justice, and Sondheim's A Little Night Music for the New York Opera Ensemble.
Craving a little stability in her life, she began to look for something that would allow her to live in one place for a while. Originally offered a screen test for the role of Dixie Cooney on All My Children while working on a pilot, she had regretfully turned it down. A few months later, All My Children came knocking at her door once again, and this time she was free to audition. Several nerve-racking weeks later, the part of Dixie Cooney was hers.
In 1990, Cady won the Daytime Emmy Award as Outstanding Juvenile Female for her portrayal of Dixie. In 1991, she won Soap Opera Digest's award for Best Heroine and received another Daytime Emmy nomination in 1992. She and her co-star, Michael E. Knight, also won Soap Opera Update's MVP Award for Best Couple. Additionally, during her time on the show she was nominated for four other Soap Opera Digest Awards, including Hottest Female Star; and Soap Opera Update's Most Valuable Player award.