Here’s How Much Cash You Need at Home, According to Experts

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Digital payment platforms like Venmo, PayPal and Cash App have changed the way we deal with cash. Most people rarely keep cash on them, much less tucked away at home.

A GOBankingRates survey last year found that the vast majority of American adults, 64%, keep $500 or less in cash at home. The survey found that 14% keep between $500 and $1,000, 11% keep between $1,000 and $2,000, 5% keep between $2,000 and $3,000, and just 6% keep more than $3,000 at home.

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While you may not want to keep thousands of dollars in cash stashed in your home, there are unexpected events that can lead to a need for it. These include emergencies ranging from catastrophic weather — like hurricanes and wildfires — to widespread power outages. If you can’t access your digital currency or banking systems are down, having cash can allow you to get gas, food and medicine with ease.

However, just how much cash should you have on hand? We asked experts to weigh in below.

From a security point of view, cash is the most insecure asset you can have. Keeping the amount of cash you have in the house to a minimum in case of fire or theft is a good rule of thumb, said Ryan McCarty, CFP, lead advisor at Castle Rock Investment Company. McCarty framed it as a ratio by saying, “In terms of amount, don’t let your cash exceed 10% of your overall emergency fund and/or $10,000.”

However, the “minimum” you should keep at home is up for debate among financial experts.

Danielle Miura, CFP, owner of Spark Financials, suggested that “you should keep enough money on hand to get you a couple of gallons of gas, pay for a delivery tip or to help in unfortunate events.” To her, this means around $100 to $200. “Emergency funds should not be held at your home,” she added. “They should be stored in a high-yield savings account of your choice.”

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Yasmin Purnell, founder of The Wallet Moth, suggested that you keep enough cash on hand in case of an emergency that would require you to access “temporary accommodation, food and drink, gasoline and medication.”

She said, “As a general rule of thumb, having access to $1,000 in cash at home would ensure you can at least pay for immediate expenses in the case of a national emergency.”

Jesse Cramer, associate relationship manager at Cobblestone Capital Advisors, believes less than $1,000 is ideal.

“It [varies from] person to person, but an amount less than $1,000 is almost always preferred,” he said. “There simply isn’t enough good reason to keep large amounts of liquid cash lying around the house. Banks are infinitely safer.”

To drive home this point, he shared that his parents’ neighbors wound up financially burned due to a house fire that destroyed their hidden stockpiles of cash.

“This is an extreme example, but the point stands,” Cramer said. “In today’s world of ubiquitous credit cards, Apple Pay, PayPal, Venmo, etc., there aren’t enough good reasons to keep large amounts of cash in the house.”

Regardless of how much cash you keep at home, you need to keep it safe. Matthew Dailly, managing director at Tiger Financial, said, “You’ll need to locate safe havens for it. The loss of a large amount of cash can happen in a matter of seconds if your home is damaged by a flood or fire. Fireproof safe storage is a good idea.”

McCarty added that for security purposes, money should be kept in a bolted-down safe along with any other valuables in the home. “Make sure the safe is fire and waterproof to avoid any damage. Make sure you deposit and replace the money on occasion so that the bills don’t get too old.”

Jay Zigmont, founder of Childfree Wealth, offered another word of caution. “Having money on hand comes with the threat of theft or loss, but also, it may be a challenge for you to not spend it,” he said. “I’ve heard of people freezing the money — literally — or giving their spouse or child the key to the safe [so that they do not have easy access to spend the money]. Figure out a balance that works for you.

Another good rule of thumb is to keep as little cash at home as you think is necessary. “Money in circulation loses value over time [due to inflation],” Dailly said.

Therefore, having too much of it at home can cost you, whereas having it in savings or investments can make you more money in the long run.

Caitlyn Moorhead contributed to the reporting for this article.

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This article originally appeared on GOBankingRates.com: Here’s How Much Cash You Need at Home, According to Experts

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3 weeks ago

0 3 minutes read