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In an era of online bank accounts, credit cards, and payment apps, many people find themselves short on one important thing: cold hard cash! When people wonder "How much cash should I have on hand?", that might mean different things to them.
Some people think of “cash” as having money in a checking account, so it’s liquid and can be withdrawn or used for purchases at any time.
Of course, the more traditional definition of “cash” is physical money: the actual bills and coins that make up currency. That’s the one we’ll mostly be talking about here!
How much cash should you have on hand—in other words, how much physical currency should you have in an easily accessible place? And how should you balance your cash stash goals with your institutional savings and investments? Let’s take a look!
Why you should have both institutional and physical savings
Having savings in one form or another is extremely important. That’s why the first piece of financial advice you’ll hear is usually to build an emergency fund! This money can tide you through job loss, unexpected medical events, and other emergencies life may throw your way (hence the name).
But what should that “in one form or another” look like? Ideally, it should be a combination! Here are the benefits of keeping some savings in a bank account and some in physical cash.
Benefits of saving money in a bank
There are compelling reasons to keep most of your savings in the bank (or a similar institution like a credit union). But it's still important to answer the question, "how much cash should I have on hand?", which we'll get to later.
For one thing, a bank is physically safer—your money is protected from things like theft, loss, and natural disasters. Banks are also FDIC-insured, meaning that even if something happens and the bank fails, federal deposit insurance will reimburse up to $250,000 per customer.
When you pay for bills and purchases with a bank card, you have an electronic record of payments. Debit and credit cards also generally include some degree of purchase protection that you don’t get with cash.
Furthermore, you can use interest-bearing savings accounts to earn rewards for keeping your money at a bank. Even if it’s only a percent or two, this can help your savings slowly grow over time.
The benefits of keeping real cash on hand
So, with all the perks and protections that banks include, why would you want to mix it up with cash savings too?
The major benefit of having cash is when it comes to emergency scenarios. When things go wrong, having an emergency cash fund can make the difference between scraping by and being comfortable. As long as the US dollar exists, cash will always be valuable, even in disaster scenarios.
Let’s look at some of the situations where you should think about how much cash to keep on hand.
How much cash should I have: Different scenarios to consider
Everyone’s needs are different, so when it comes to how much cash to keep on hand, there’s not one single number that will work for everyone. Here’s how to think about saving cash for common scenarios.
How much cash do you need...
There are a lot of emergency scenarios where cash may come in handy.
Maybe the power goes out and local stores can’t process electronic payments until it’s back.
Maybe there’s a problem with your bank, or a scammer accesses your account, and you get temporarily locked out.
Or there could even be a natural disaster or national state of emergency where circumstances prevent you from using cards or visiting the bank for a more prolonged time.
When wondering how much cash should you have on hand for emergencies, you should consider the costs of common essentials like:
- Transportation costs (e.g. gas)
- Basic toiletries
It’s always best to assume that prices will rise in emergencies, so it’s smart to build in a buffer. Find an amount that works for the things you need now, then double it.
You can also start making an emergency stockpile of physical goods, to minimize what you might need to buy later.
If I lose my job
The common wisdom is to save a total emergency fund with six months of expenses to tide you over in the case of sudden income loss. However, most of this money can be safely kept in the bank.
In normal circumstances, when you lose your job, you still have access to your bank accounts and cards, so you don’t specifically need physical cash.
As you build your emergency savings fund, your plan could be as simple as setting aside one or two months’ worth in cash.
If I need secret savings
Your need for cash can also arise from a personal emergency, like leaving an abusive relationship or family situation.
This is a scenario that many of us don’t like to think about, but unfortunately many women are caught unprepared by it.
In a time when one in three women have been abused by an intimate partner, it’s important to think about having a “get out fund”. If financial abuse is part of the picture, hidden cash can be your ticket to freedom.
How much cash should you have available in case a relationship goes south? Calculate how much money you would need if you had to start from scratch. You can think about it in tiers:
- Start by saving enough that you could simply afford transportation to a shelter or trusted friend or relative. A full gas tank, Uber ride, bus ticket, plane ticket, etc.
- Then, save enough that you could afford essentials like food, health/car insurance, a new phone, and new clothes if you had to leave without packing much.
- Next, save enough that you could afford to shelter yourself. In the short term, it can be a hotel room. In the long term, it can be a deposit and first month’s rent for a new apartment.
- Thinking even more long-term, you could save money for legal fees (specifically for a divorce or custody battle).
No matter how safe and stable your relationship is, it never hurts to have some cash put aside that’s just for you. If you have children or you’re pregnant, it’s protection for them too.
Just in case
Of course, there are also some non-emergent reasons to think about how much cash to keep on hand. Cash-only stores and restaurants still exist!
Having some cash on hand lets you spontaneously buy vegetables from a farm stand or take the family to a cash-only festival. You could also save a bit of money by using cash at stores that charge fees to use cards.
If you feel more comfortable targeting a nice round number, make your initial goal to always have at least $100 in your wallet and $1,000 at home.
Ultimately, keeping some cash around for a rainy day is helpful, whether the scenario is just a light drizzle or a full-on hurricane. The answer to "how much cash should I have on hand?" is often "more than you think!"
When going out
When you're out, you never know when you might need cash. While most places accept debit and credit cards these days, as well as payments by app or Apple pay, it doesn't hurt to be prepared.
For example, you could be at a restaurant that only accepts cash, or maybe you want to easily split the bill with friends. In these cases, having some extra funds with you could help.
It's important not to carry a lot of cash, because you don't want to be a target for theft, but you should have money to buy some food and to get a ride home just in case. About $50-$100 depending on the situation should suffice.
If you have young kids
When you have children, you can never be too prepared. A situation could arise that you need cash for. For example, if you're at the movies or a museum with your kids and your card isn't working.
You might also need cash for many other reasons, but when you have family, you might want to keep a bit more money with you, just make sure you hide it well!
For a day out with your kids, it's smart to bring at least $100 with you in cash. Maybe more, depending on the day's activities and where you'll be going.
Ideas for quickly saving up cash
If you don’t have that much cash right now, there are some simple things you can do to get some crisp bills into your hands!
- Move money from savings and withdraw cash from an ATM
- Hold a yard sale or even list items on a local app like Facebook Marketplace or OfferUp
- Start a side hustle (e.g. pet-sitting or delivering for Instacart and saving your tips)
- Make and sell hand-crafted items
- Opt to get a little cash back (e.g. $20) each time you grocery shop and pay with a debit card
- Sell firewood or garden vegetables in a self-serve driveway stand (for rural areas)
- Recycle aluminum cans in bulk
- Sell your used textbooks from college
- Do a no-spend challenge and withdraw the amount of money you save in cash
- Use coupons when you shop
Also, check out these money-making hacks to increase your savings! As long as you've got a bank account and access to a branch or ATM, you can turn just about any form of payment into cold hard cash immediately.
4 safe places to keep your cash
Now you know the answer to, "how much cash should I have on hand". Since cash is vulnerable to more risks than bank savings, having a safe storage plan should be a top priority. Here are some ideas for where to keep all that important paper!
1. Inside a fireproof safe
This is basically the reason safes exist. They’re one of the best places to keep cash, important documents, and other valuables. A good safe will be fireproof, waterproof, and theft-proof as long as the combination or key is secure.
Position your safe somewhere relatively hidden and make a habit of never mentioning that you have one.
2. Buried in a waterproof container
This idea is best for true “dire emergency” cash because you don’t want to be digging up your yard every time the power goes out!
To implement this idea, you’ll want to make sure your cash is wrapped up in multiple layers to keep it secure from bugs and the elements.
For instance, you can put it inside a sealed plastic bag, an airtight glass jar, or in a metal tin. There are also some great waterproof containers you can buy. Don’t forget where you buried it, and let a trusted family member know it’s there too.
3. Hidden in false home accessories
Want to feel extra sly with your hidden cash? You can deck out your house with some false fixtures/accessories disguising secret containers. You can get fake wall outlets doubling as tiny safes, fake cans of corn or shaving cream, or fake air vents or drain pipes.
These will be more inconspicuous than a safe, but typically won’t be fireproof options. Avoid hollow books, as these are well-known enough that thieves may know to check your library.
4. Distributed in different hiding spots
Keeping all your money in one spot means that if anything happens to it, you could lose the whole amount. If you distribute the money across different hiding places, each one becomes less risky.
You can also keep some cash with you in your bag or hidden in your car, so you have it on hand when you’re out and about.
Your turn: how much cash should you keep on hand?
It's your turn to come up with your household's answer to "How much cash should I have on hand"! After that, the next step is to take your cash savings goal from theory to practice.
The best time to start saving cash is before you need it. Whether you hide it, bury it, or stick it in a safe, you’ll feel better knowing you have money squirreled away for a stormy day.