How Much Cash Should I Have On Hand?
How Much Cash Should I Have On Hand? It Might Be Less Than You Think
Ivana Pino ·Senior Writer Tue, August 13, Yahoo Personal Finance
According to an analysis by Capital One, 47.8% of American adults make no cash purchases in a typical week. And in the U.S., an estimated 87.4% of all transactions are cashless.
With card and digital payments emerging as the primary payment methods for most consumers, you might wonder how much cash you should keep in your wallet — if any at all.
Here’s a look at the benefits and drawbacks of carrying cash, and how to go about deciding how much you should keep on hand.
How Much Cash Should I Have On Hand?
Cash may no longer be king, but it’s not obsolete by any means. There are instances when paying in cash might be more beneficial than using a debit card, credit card, or digital wallet. For instance, many small businesses prefer cash and may even offer a small discount because it saves them the fees associated with credit card transactions.
Experts say it’s common for most Americans to carry $20 or $30 in cash. Ultimately, however, the amount of cash you should have on hand depends on your unique financial situation.
When determining the right amount to carry in your wallet, consider how often you use cash and for what types of expenses. Do you prefer to save up cash for big-ticket purchases, or do you mainly rely on cash for smaller transactions such as tipping?
Either way, it’s best to minimize the amount of cash you keep on hand. For one, cash isn’t insured against loss unless it's deposited in a bank, making it vulnerable to damage, loss, or theft. Plus, physical cash doesn’t have the opportunity to earn interest or grow in value. And over time, inflation reduces the purchasing power of cash.
That said, you do want to ensure your spending money and emergency savings are “liquid.” For money that you expect to need in the near future, consider depositing it in a federally insured bank account, such as a checking account or high-yield savings account. This allows you to generate interest, which helps protect your purchasing power and increase your wealth over time, while also maintaining easy access to the funds.
Pros And Cons Of Carrying Cash
Having some cash in your wallet can be helpful when you find yourself in a situation where a merchant or retailer doesn’t accept cards or digital payments. But there are definitely downsides to carrying cash too.
Here are some of the major pros and cons of cash to consider when evaluating how much you should keep on hand.
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