How Much Cash Should I Have on Hand?

Tyler Parker, Preferred Banking Office Manager, First Republic Bank
July 29, 2022

  • It’s important to keep at least some emergency cash on hand to pay for unforeseen expenses.
  • The amount of cash you should have on hand varies depending on your current income and savings goals.
  • You can store cash as physical bills, in a checking or savings account or in other savings vehicles, such as a certificate of deposit (CD) or money market account.

Having cash on hand to cover unexpected expenses is an important part of any savings plan. A general rule is to have enough money safely set aside and readily accessible to cover three to six months' worth of expenses, although this exact amount will vary depending on your financial situation.

Read on for tips regarding how much cash to have on hand when you’re working versus when you’re retired, plus how much accessible cash to have in your home versus in your wallet.

How much cash to have on hand if you’re still working

Beyond building a stronger emergency fund and having enough money for day-to-day expenses, people who are still working should consider creating long-term savings goals for greater financial stability.

Evaluate the pros and cons of the accounts you choose (especially for applications like emergency savings), as every banking option comes with its own benefits and drawbacks.

Money in your checking account

If you’re still working, you’ll want to have enough cash to cover essential living expenses such as food and shelter, as well as enough to withdraw for other discretionary purchases. Although you can keep liquid cash as physical bills at home, checking accounts offer cash that’s readily accessible (a must-have in emergency situations), while keeping your funds secure.

Keep in mind that checking accounts may have single-day withdrawal limits, or limits placed on ATM withdrawals. Additionally, checking accounts don’t always accrue interest like savings accounts do.

Money in your savings account

If you’re employed, a general rule for how much cash to keep in a savings account is enough to cover at least three to six months’ worth of living expenses. This can help you cover unexpected expenses that may pop up, such as urgent repairs or medical bills.

There are a few types of accounts where you can put this money and optimize savings, but one strong choice is a high-yield savings account, insured by the Federal Deposit Insurance Corporation (FDIC). You may also want to consider choosing an account that has convenient mobile banking features.

How much cash to have on hand if you’re retired

Determining how much cash one should have on hand as a retiree is important, since retirees may look at their availability of cash differently than those who are still working. Many retirees will have retirement accounts they’re pulling their money from, but it can be beneficial to create an emergency fund to avoid drawing too much money from your retirement savings, such as a 401(k), individual retirement account (IRA) or pension plan, in case of unexpected expenses.

Money in your checking account

If you are a retiree, many experts recommend having more liquid cash available than those who are currently working. A good rule for a retiree is 12 to 24 months’ worth of expenses since you do not have a regular income.

Money in your savings account

The amount of money you should have in savings if you are a retiree is contingent on how much you earned during your working years. Many experts suggest having 60% to 80% of your pre-retirement income to live a comparable lifestyle upon retirement. So, if you made $75,000 per year, you should have between $45,000 and $60,000 per year to draw from after retirement.

Since you do not need to have all this money as liquid cash on hand, your savings can be stored in other places besides a savings account. This could include storing funds in a money market account or investing in a savings vehicle, such as a certificate of deposit (CD)

How much cash should you keep in your home?

The amount of cash you should keep at home is dependent on how much money you’re willing to save for this purpose. For some, a cash fund at home might be considered a variation of a rainy day fund, offering quick access to money. 

However, it’s wise to keep a true rainy day fund in an FDIC-insured bank account for safety reasons.

Where Is the Safest Place to Keep Cash at Home?
To protect your cash, consider keeping it in a waterproof, fire-resistant safe.

How much cash should you keep in your wallet?

There’s no hard-and-fast rule about how much cash you should carry in your wallet. However, it can be helpful to have one to three days’ worth of cash on hand in case your debit card is lost or stolen.

Why are emergency funds important?

Having an emergency fund is extremely important to address any unexpected expenses or a sudden loss of income. For long-term financial health, it's important to have a sufficient cash cushion to pay for things like urgent home or car repairs without going into debt.

How Much Emergency Cash Should You Have on Hand?
A general recommendation for an emergency fund is to be able to cover a few months' worth of expenses in case of urgent expenses or a loss of income. In an emergency, the ability to access this money quickly is important.

The bottom line

Although the "right" amount of cash in an emergency fund will vary depending on your financial situation, the best time to start saving is now. By building a robust emergency fund, you can be better prepared for unexpected spending, while keeping yourself on track to meet your financial goals. 


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