How much cash should I keep on hand?

Cash is king, the saying goes, but it seems increasingly useless in today’s world. Friends pay 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 at Ridgewood Savings Bank in New York.

According to Erin Wood, senior vice president of financial planning and advanced solutions for the financial firm Carson Group in Omaha, Nebraska, the preference for using cash may be generational. Older people may want to have money in their wallet, but young adults may not see the need for it given the ability to transfer money using apps like Venmo and PayPal. “For them, it’s cash,” she says.

Despite all the digital payment methods available today, there may still be times when you’re happy to have cash in your pocket. Keep reading for everything you need to know about how much cash you need to keep on hand.

Opinions differ on the necessity of carrying cash on a daily basis. Sanchioni, for example, says he rarely encounters situations where money is needed. Others think it’s a good idea to have cash at all times.

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

For example, some smaller retailers may offer discounts to those who pay cash, but this is an opportunity you won’t get without a few bills in your wallet. Likewise, having cash could be beneficial in tricky situations.

Wood cites the example of a local gas station in his area that once had a technical issue while processing card payments. Those with an empty tank and cash could fill up to get to the next gas station, while those without cash had to hope to be able to withdraw some at the ATM.

Although there is disagreement on whether cash is necessary for day-to-day expenses, there is consensus that those traveling should have cash in the local currency on them at all times. any time. Wood suggests carrying enough to get you through a 24-hour period, especially when traveling internationally. “You might not know the next place is you’ll have access to money,” she says.

Although cash can be useful in some situations, its vulnerability to theft may be one of the reasons it has fallen out of favor with many people.

“Carrying paper cash carries a risk,” says Sanchioni. “It doesn’t matter what you wear, that’s how much you’re willing to lose.”

A stolen debit or credit card can be canceled and fraudulent charges reversed. But with money, once it’s gone, it’s gone. “There aren’t many ways to protect money,” Wood says. “It’s not traceable.”

To reduce the possibility of losing all your money to a pickpocket or purse thief, consider spreading it among several different places, such as some in a pocket and some in a purse. hand.

Another pitfall of cash addiction 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 under $2,000.

There is no one amount of cash that will be good to carry in all situations.

“It really depends on the individual,” Brabham says. It suggests $100 to $500, depending on your spending habits. For example, if you’re shopping for the holidays at a craft or fine arts fair, you might bring more cash, as some vendors may discount prices for these payments if asked. “You can get a good deal if you pay cash,” notes Brabham.

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

If you regularly tip, it may be a good idea to carry extra cash, although Sanchioni notes that tips can be added to many digital payments.

Some people like to have cash at home for emergencies, but Sanchioni says there are very few events that would limit a person’s ability to get to an ATM if cash is necessary. Natural disasters such as hurricanes can be a time when having money in the house comes in handy.

In many cases, a few hundred dollars can be enough, and people need to be careful where they store that money. A store-bought safe, for example, could give a false sense of security. “They can be taken from Home Depot, and they can be taken from your home,” Sanchioni says.

As with carrying cash on your person, it can be a good idea to store cash in your home in different places, especially if you have a lot of money. Some people get creative and put money in expected places, like wrapped up like a package of meat in the freezer.

If you have a large sum of money in your home, do not share this information with others, lest you become the target of theft. However, you need to make sure your heirs can find the money in the event of your unexpected death. Note its location in your estate planning documents or share these details with someone you trust.

Or, a safer option would be to keep your money in a safe deposit box at the bank, advises Wood.

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

“For the average person, having a few thousand dollars in cash would be the upper limit,” Brabham says.

Beyond that, you miss the opportunity to earn interest on money kept in the bank. The FDIC insures up to $250,000 per depositor at member institutions, which means your money is guaranteed. Sanchioni notes “I’ve never met anyone who lost money in their FDIC-insured accounts.”