How Much Cash Should I Have On Hand? The Best Places to Keep Your Money

Updated · Nov 16, 2022

Financial advisors constantly talk about the importance of an emergency fund.

But one question that often remains unanswered is:

How much cash should I have on hand?

That depends on your circumstances. But there are some guidelines you can follow.

In this article, we explore experts' advice on how much cash you should keep on hand, at home, and in the bank.

How Much Cash Should I Have On Hand?

The answer depends on your income, needs, and spending habits.

In an era of contactless payments, we need very little cash. You can pay with a card almost everywhere, so what's the point of carrying around money?

Some people find that having cash on hand motivates them to spend less. It makes them more aware of their spending, so it’s easier to control it.

This is basically the logic of the cash envelope system. You carry as much as you allow yourself to spend in a given budget category.

If you're using this or a similar budgeting method, you'll likely have around a month worth of discretionary expenses in your wallet.

But this doesn’t make much sense under other circumstances. In fact, paying with a credit card instead of cash has many benefits.

For starters, you can earn rewards and cashback—that’s money you’ve spent refunded to your account!

Plus, it is safer than carrying around large amounts of money. Besides, some local stores and coffee shops still don't accept card payments.

As such, experts suggest you should have $100-$300 emergency cash in your wallet.

It’s enough to cover small expenses when card payments aren’t available. At the same time, it’s not so much that you’d worry about theft.

How Much Cash Should I Keep at Home?

The goal of keeping cash at home is to have money available in case of a national emergency.

This could be anything from a major power outage to a natural disaster that prevents you from using the ATM or your bank.

But a common question is:

How much emergency funds do I need at home?

The recommended amount for emergencies in general is three to six months' worth of expenses.

Of course, having that much money in hand isn't always possible or practical.

For one thing, it isn't safe to keep a large sum under your mattress. That time has long passed.

What’s more, with the rising inflation rates, your emergency money will gradually decrease in value.

Experts recommend keeping $1,000-$2,000 in cash at home. This should be enough to cover urgent expenses, like medication and food.

Yet, you won’t go bankrupt if you lose it. The rest of your savings should be in a bank.

How Much Should I Have In My Emergency Fund?

Emergency funds are an essential part of your financial security.

They can help you cover unexpected expenses, like car repairs or a trip to the ER. What's more, you should have enough to live off if you lose your job unexpectedly.

Ideally, that should be three to six months' worth of living expenses for an individual. If your family depends on your income, try to lay aside enough for a year.

Of course, you shouldn’t save it up in cash—that’s a huge amount of money to have laying around losing value.

How Much Savings Should I Have?

In addition to emergencies, you might want to save up for plenty of other purposes.

Once your emergency account is full, how much money should you have in savings?

Well, that depends on your individual circumstances.

For example, saving for retirement and for a vacation will require different amounts and schedules. Either way, the key is to have a goal in mind and make regular contributions.

If you don’t have a particular aim and aren’t sure how much you should have in savings, start with 20% of your salary. Before you know it, you’ll have a decent amount in your account.

The next question is:

Where should you keep that money?

The idea of an emergency fund is to have liquid cash—money you can withdraw and use rapidly. You should put it in a secure, FDIC-insured account.

Whether you keep it in cash or in a savings account, it's just sitting there, losing value due to inflation. In the best-case scenario, it's earning negligibly low interest.

To avoid that, you could keep the part of your savings you won't need urgently or in the near future in an investment account.

But another question arises:

How much should I have in savings and how much—in investments?

The answer depends on your risk profile.

If you’re risk-averse, check out short-term investment options, such as money market accounts or certificates of deposits (CDs).

Both options have higher interest rates than savings accounts. At the same time, they are safer than investment accounts.

The downside is that your money is locked for a certain period of time. But after that, you can withdraw them quickly.

Wrap Up

Do I need a savings account?

How much cash should I have on hand?

Should I keep all my money in the bank?

If you're asking yourself all these questions, this article is for you. Savings are essential, but it's equally important what you do with them.

Read our detailed guide above to find out how much money you need for emergencies and where to keep it.

Aleksandra Yosifova
Aleksandra Yosifova

With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.