How Much Cash Should You Stash?

Posted by Richard on July 20, 2023

Money is going digital. When your check goes straight to your bank account and you pay your bills directly from that account, you might never see an actual bank note. But should you have some cash on hand? You might need to tip someone, or pay for a service, and what about an emergency? If a tornado hits your area, the power goes out, and your home is so damaged you can’t stay there, you might need some cash to get lodging and food.

The question is how much cash to keep. Money people have different views on that.

First, you don’t want to keep too much around. Cash is an insecure asset — it can be lost or stolen or even burned in a fire. You want to store your cash in a safe place. Cash loses value to inflation, so you want most of your cash in the bank.

Danielle Miura, founder and owner of Spark Financials, told Go Banking Rates in an interview that she thinks we need $100 to $200 — enough for some gas, a tip, or an emergency expense.
Yasmin Purnell, founder of The Wallet Moth, thinks the amount should be more like $1,000. Enough to get a hotel, dinner, water, gasoline, and medication. Other personal finance types say you might be better off protecting yourself with extra food like canned goods in a closet or other staples.

One situation where cash might be handy (or not), is in the case of a devastating emergency, such as a hurricane or tornado. Disasters can create mini economies of need. Five gallons of gasoline might be priceless. Four gallons of water might be irreplaceable. Canned goods might be essential, especially during extended periods of need. In these situations, scarcity will cause prices to rise. While cash could be handy, you might need the commodities more.