It’s a question many of us ask ourselves: how much money should I keep in cash? After all, cash is a great way to ensure that you have quick and easy access to funds when an emergency arises. But there are definitely some things to consider before actually deciding how much you should keep in cash. Let’s explore these considerations and why it matters to keep some money in cash.
Types of Cash Accounts
First things first, let’s discuss the different types of accounts that are considered “cash accounts.” Generally speaking, if the money is not invested (i.e., stocks, bonds, mutual funds), then it is considered a cash account. Common examples include checking accounts or savings accounts at an FDIC-insured bank or credit union. These types of cash accounts offer stability and liquidity because they are protected by government insurance and you can withdraw or transfer your money out quickly and easily.
Benefits of Keeping Some Money in Cash
Keeping some money in cash can provide peace of mind knowing that you have access to funds when needed. This could be used for emergency expenses or financial opportunities such as short-term investments with high returns or unexpected discounts on big-ticket items like new appliances. Having a stash of available funds gives you more control over your finances and flexibility if something comes up last minute.
How Much Money Should You Keep In Cash?
So now we come back to the original question – how much money should you keep in cash? The answer depends on several factors including income level, lifestyle expenses, financial goals, etc., but most experts recommend having 6 months worth of living expenses set aside in an accessible account such as checking or savings. So if your monthly living expenses total $2,000 per month, then it would be ideal to have at least $12,000 saved up for emergencies or other unforeseen circumstances. This number may vary depending on individual circumstances; for instance, someone who is self employed may want to save closer to 1 year’s worth just because their income stream isn’t as stable compared to someone with a W2 job from a single employer.
Keeping some money in cash can provide stability and liquidity which are both important aspects when it comes to personal finance management. When considering how much money you should keep in cash it’s best practice to have at least 6 months worth of living expenses saved up for emergencies or other unforeseen circumstances; however this number can be adjusted based upon individual needs and income level/type… Ultimately keeping some money in cash provides extra flexibility when times get tough or financial opportunities arise unexpectedly so it pays off to plan ahead!
