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How Much Cash Should I Have On Hand?

Last updated 03/15/2024 by

Jamela Adam

Edited by

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While there’s no magic number that will guarantee financial security, having a healthy cash reserve can help you weather any storm. Most financial experts recommend having enough cash on hand to pay for three to six months of expenses. To start saving, consider automating your savings, living below your means, and paying off high-interest debt.
Do you have enough cash on hand to cover your expenses in case of an unexpected emergency? A recent study by the Federal Reserve found that 35% of Americans could not afford to cover a $400 emergency expense without borrowing money.
So how much cash should you ideally have on hand? The answer, unfortunately, is that it depends. In this article, we’ll further explore the idea of emergency funds and the importance of having enough cash on hand.

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How much cash should I have on hand?

There isn’t a definite answer when it comes to how much cash you should keep on hand, as it largely depends on your individual circumstances. For instance, if you have a steady revenue stream and a large disposable income, you may be able to come up with more cash than someone who has a variable income and no savings. But in general, most experts recommend that you keep enough cash on hand to cover three to six months of expenses.
After all, emergencies can happen at any time, and it’s always good to have some money stacked away for these unforeseen situations. Let’s say a catastrophic event were to happen and ATMs stop working, you’ll need to have physical cash in order to pay for your basic necessities. Of course, you might still be able to use online payment services for certain transactions, but it’s good to be extra prepared.

The 50/30/20 rule

To have enough cash on hand to cover unexpected expenses, you’ll need to manage your finances wisely. One of the most popular budgeting rules of thumb that many financial experts recommend following is the 50/30/20 rule.
The rule states that you should spend 50% of your income on needs, 30% on wants, and 20% on savings and debt repayment. This rule can be a helpful starting point for creating a budget because it provides a clear breakdown of where your money should go.
However, keep in mind that everyone’s financial situation is unique, so don’t be afraid to adjust the percentages depending on your individual circumstances. For example, if you have a lot of debt, you may want to allocate a larger proportion of your income towards debt repayment.

Pro Tip

When life gets hectic, it’s easy to not stick to your budget. If you’re struggling with discipline, consider using a personal finance app such as Mint or Personal Capital to help you stay on track with your savings goals.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Why you need an emergency fund

It’s never a bad idea to have some money set aside for emergencies. Whether it’s a global financial crisis, a declining market environment, or a job loss, unexpected expenses can pop up at any time. Having a stack of emergency cash saved up can help you weather the storm and get through these tough times.
Many people don’t prioritize creating a personal safety net by setting up an emergency fund, which is why they often end up going into debt when an emergency hits. And with the recent rise in prices everywhere due to inflation, American credit card debt hit $841 billion in the first quarter of 2022.
So, if you haven’t already, start building up your fund as soon as possible. That way, if something happens, you’ll be more than prepared. Get started by putting your hard-earned money into a savings account, such as one from the list below.

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4 ways to stash your cash and build your emergency fund

It’s never too late to start saving for a rainy day. Here are a few ways to help you stash your money and reach your financial and savings goals.

1. Live below your means

When you live below your means, you have more wiggle room in your budget for savings. Over time, those savings can add up to a significant chunk of change. And if you ever find yourself in a financial bind, you’ll be glad you have that cash on hand.
To live within your means, start by tracking your day-to-day spending and getting rid of unhealthy money habits. For example, if you’re spending every last dollar of your disposable income on fancy restaurants and food delivery, it’s time to reevaluate your budget.
Apart from tracking your expenses, make sure to not overextend yourself with credit cards or loans. Before taking on any kind of debt, think carefully about whether you can afford to make repayments each month.

2. Automate your savings

If you’re serious about building an emergency fund or getting your finances in order, try automating your savings.
For example, most banks allow you to schedule a recurring deposit from your checking account into linked savings accounts. This way, you can make sure that a fixed percentage of your income is automatically transferred to your savings account each month.

3. Set a target date

Another great way to stash away cash for your emergency fund (or different sinking funds) is to set a target date and make it a fun challenge. Pick a date that’s realistic and challenge yourself to save a certain amount of money. For example, you can challenge yourself to save $3,000 by the end of the six months.
Once you’ve set your goal, start putting away money consistently until you reach it. Of course, you might need to make a few sacrifices during this time, like eating out less or cutting back on shopping, but it’ll be worth it when you have a fully funded account.

4. Get rid of high-interest debt

When you have high-interest debt, a large chunk of your income goes towards paying off the interest each month. This leaves you with less money to put into your emergency fund and can feel like you’re stuck in a never-ending cycle of debt.
To break out of this cycle, prioritize paying off your high-interest debt. If you’re struggling with multiple debts, you can even consider taking out a debt consolidation loan to help you better manage those payments. This way, you can start freeing up more money to put away.


How much cash should I have on hand at home?

It’s always a good idea to have some cash on hand in case of an emergency. But how much cash should you keep at home? Some experts recommend keeping $1,000 in a safe at home, while others say that you should aim to have $2,000 readily available. Of course, this may vary depending on your particular circumstances.
For example, if you live in a rural area where there are no ATMs or banks nearby, you may want to keep more cash on hand in case of an emergency. Also, if you have a medical condition that requires regular prescriptions, you may want to keep enough cash on hand in case you can’t access your bank account for an extended period of time.
At the end of the day, it’s up to you to decide how much cash you need to keep at home. But it’s always better to err on the side of caution and have too much cash rather than too little.

How much should I hold in cash?

There’s no definitive answer to this question, as it depends on your unique financial situation and goals. In general, most financial advisors recommend holding between three to six months’ worth of living expenses in cash. This cushion can act as a rainy day fund to help cover unexpected expenses.
Bear in mind that cash will lose value over time due to inflation. As such, you may want to invest any excess cash in the stock market or securities that can provide some sort of return.

Pro Tip

To make sure you can easily access your emergency fund, park it in a high-yield savings account, or an instrument that could be liquidated quickly — such as a money market account or a no-penalty CD account.

How much cash does the average person carry on them?

With digital payments becoming the norm, fewer and fewer consumers are carrying cash on them on a regular basis. In fact, a survey by the U.S. Bank of over 2,000 Americans revealed that most people don’t carry much cash. Out of all of the respondents, over 70% say they carry less than $50 when they’re out in public, and 46% say they use cash less than 8 days a month.
But while you may not need to carry around a wad of cash like you used to, it’s still smart to have some on hand just in case. After all, there are some stores and businesses that only accept cash ⁠— such as night market food stalls and laundromats.

Key Takeaways

  • How much money you should have on hand will largely depend on your personal situation. However, most financial experts recommend having enough cash to cover three to six months of expenses.
  • If you’re serious about building your emergency fund, try to live below your means, automate your savings, and get rid of outstanding high-interest debt.
  • Though most businesses accept digital payments nowadays, it’s still a good idea to keep cash on you just in case.

Begin building your savings

If you’re building your emergency fund from scratch, don’t get discouraged quickly. Set up a budget and begin setting aside money for your savings and checking accounts. Before you know it, you’ll have the peace of mind that comes with knowing you’re prepared for whatever life throws your way.
And if you need help along the way, use a budgeting app to track your spending and make sure you’re allocating enough money each month to your cash reserve.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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