How Much Cash Should I Keep on Hand? | Personal Finance

Cash is king, the saying goes, but it seems to be unnecessary in today’s world. Friends pay each other with Venmo, delivery apps include digital tipping options and even small retailers now accept credit and debit payments.

“I see the need for cash diminishing beyond personal choice,” says Mark Sanchioni, chief banking officer for Ridgewood Savings Bank in New York.

A preference to use cash may be generational, according to Erin Wood, senior vice president of financial planning and advanced solutions for the financial firm Carson Group in Omaha, Nebraska. Older individuals may want to have some cash in their wallet, but young adults may not see any need given the ability to transfer money using apps like Venmo and PayPal. “For them, that is cash on hand,” she says.

Despite all the digital payment methods available now, there could still be times when you’ll be glad to have some cash in your pocket. Keep reading for everything you need to know about how much cash you should keep on hand.

When and Why to Carry Cash

There are differing opinions about the need to carry cash on a daily basis. Sanchioni, for instance, says he rarely encounters situations in which cash is required. Others believe having some cash on hand at all times is smart.

“I think it’s advisable,” says Lamar Brabham, CEO and founder of Noel Taylor Agency, a financial services firm in North Myrtle Beach, South Carolina. “It’s all about having access if you have an emergency or an opportunity.”

For instance, some small retailers may offer discounts to those paying in cash, but that’s an opportunity you won’t have without some bills in your wallet. Likewise, having cash could be beneficial in sticky situations.

Wood points to an example of a local gas station in her area that once had a technical problem processing card payments. Those with an empty tank and some cash could fill up enough to get to the next gas station while those without cash needed to hope they could withdraw some from the ATM.

While there is disagreement about whether cash is needed for daily expenses, there is consensus that those who are traveling should have cash in the local currency on them at all times. Wood suggests carrying enough to get you through a 24-hour period, particularly when traveling overseas. “You may not know the next place is that you’ll have access to cash,” she says.

Potential Pitfalls of Carrying Cash

While cash can come in handy in some situations, it’s susceptibility to theft may be one reason why it has fallen out of favor among many people.

“Carrying paper cash has a risk to it,” Sanchioni says. “However much you carry is how much you’re willing to lose.”

A stolen debit or credit card can be canceled, and fraudulent charges reversed. But with cash, once it’s gone, it’s gone. “There’s not a lot of ways to protect cash,” Wood says. “It’s not trackable.”

To reduce the possibility of losing all your cash to a pickpocket or purse snatcher, consider splitting it among several different locations, such as some in a pocket and some in a purse.

Another pitfall of relying on cash is the rise of cashless merchants. Although still relatively rare, some merchants prefer not to handle cash, especially amid the COVID-19 pandemic. However, if passed and signed into law, a bill currently before Congress – the Payment Choice Act – would require retailers to accept cash payments for purchases less than $2,000.

How Much Cash Should I Carry With Me?

There isn’t one amount of cash that will be right to carry in all situations.

“It really depends on the individual,” Brabham says. He suggests $100-$500, based on your spending habits. For instance, if you’ll be doing holiday shopping at a craft or fine arts fair, you could bring more cash since some vendors may discount prices for these payments if asked. “You can get a good deal if you pay cash,” Brabham notes.

While Wood suggests carrying enough to cover expenses for a 24-hour period while traveling, she thinks $20 is sufficient for most people to have on them for a daily basis.

If you tip regularly, having more cash on hand may be advisable, although Sanchioni notes that tips can be added to many digital payments.

How Much Cash Should I Have on Hand at Home?

Some people like to have cash at home in the event of an emergency, but Sanchioni says there are very few events that would limit a person’s ability to go to an ATM if cash is needed. Natural disasters such as hurricanes may be one time when having some cash at home is helpful.

In many cases, a couple hundred dollars may be sufficient, and people should be careful where they store that money. A home safe bought from a store, for instance, could provide a false sense of security. “They can be carried out of Home Depot, and they can be carried out of your house,” Sanchioni says.

As with carrying cash on your person, it may be a good idea to store cash at home in different places, particularly if you have a large sum. Some people get creative and put cash in expected places, such as wrapped like a package of meat in the freezer.

If you do have a large amount of cash in your home, don’t share that information with others, not you become a target for theft. However, you should make sure your heirs can find the cash should you pass away unexpectedly. Make a note of its location in your estate planning documents or share those details with one trusted person.

Or, a more secure option would be to keep your cash in a safe deposit box at the bank, Wood advises.

How Much Is Too Much Cash to Have on Hand?

Having some cash on hand may provide a sense of security, but too much could be a financial mistake.

“For the average person, having a couple thousand in cash would be the top limit,” Brabham says.

Beyond that and you are missing out on the opportunity to earn interest from money kept in the bank. The FDIC insures up to $250,000 per depositor at members institutions, which means your money is guaranteed. Sanchioni notes “I’ve never run across anyone who has lost money in their FDIC-insured accounts.”


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