Weekend Read - How Much Cash Should You Keep on Hand?
06/13/2025Weekend Read - How Much Cash Should You Keep on Hand?
When it comes to financial planning, one of the most common questions I get is: “How much cash should I keep on hand?” The answer isn’t one-size-fits-all, but there are a few solid rules of thumb to start with.
Most financial planners, myself included, recommend keeping between three to six months' worth of living expenses in an easily accessible savings or checking account. This cash reserve is often called an emergency fund, and it is used to address unexpected expenses (medical bills, home repairs, or car trouble) so that you don’t have to dip into investments at an inopportune time.
Here’s how I think about it, three to six months of expenses is generally enough to cover life’s surprises. If your income is steady and predictable—and you’re comfortable with a smaller buffer, three months may be just fine. On the other hand, some people simply sleep better knowing they have six months’ worth set aside. There’s no “right” answer here. As long as you’re in that general range, I think you’re in a healthy spot.
That said, holding “too much” cash can work against you over time. Historically over the last 10, 15 and 20 years, the S&P 500 has returned about 10-12.5% on average (FactSet). During the same time period, checking/savings accounts paid less than 0.1% (ycharts.com). While high-yield savings accounts may offer around 4–5% interest today, that had been a very recent phenomenon due to elevated interest rates at the Fed, and still falls short of the long-term average return of a diversified investment portfolio.
Even if the idea of taking your cash and investing it in stocks makes you nervous, at the very least, I think we should discuss putting it into some bonds like treasuries or cds, which should still provide much better returns for a longer period of time than your checking/savings account.
So once your emergency fund is topped up, it usually makes sense to invest the rest in line with your long-term goals. If you’re not sure what your number should be, or where to park your cash, let’s talk. Having a thoughtful cash strategy makes sense.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
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Enjoy your weekend,
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
For index definitions, click here
AdTrax 8058358.1 Exp 6/26
When it comes to financial planning, one of the most common questions I get is: “How much cash should I keep on hand?” The answer isn’t one-size-fits-all, but there are a few solid rules of thumb to start with.
Most financial planners, myself included, recommend keeping between three to six months' worth of living expenses in an easily accessible savings or checking account. This cash reserve is often called an emergency fund, and it is used to address unexpected expenses (medical bills, home repairs, or car trouble) so that you don’t have to dip into investments at an inopportune time.
Here’s how I think about it, three to six months of expenses is generally enough to cover life’s surprises. If your income is steady and predictable—and you’re comfortable with a smaller buffer, three months may be just fine. On the other hand, some people simply sleep better knowing they have six months’ worth set aside. There’s no “right” answer here. As long as you’re in that general range, I think you’re in a healthy spot.
That said, holding “too much” cash can work against you over time. Historically over the last 10, 15 and 20 years, the S&P 500 has returned about 10-12.5% on average (FactSet). During the same time period, checking/savings accounts paid less than 0.1% (ycharts.com). While high-yield savings accounts may offer around 4–5% interest today, that had been a very recent phenomenon due to elevated interest rates at the Fed, and still falls short of the long-term average return of a diversified investment portfolio.
Even if the idea of taking your cash and investing it in stocks makes you nervous, at the very least, I think we should discuss putting it into some bonds like treasuries or cds, which should still provide much better returns for a longer period of time than your checking/savings account.
So once your emergency fund is topped up, it usually makes sense to invest the rest in line with your long-term goals. If you’re not sure what your number should be, or where to park your cash, let’s talk. Having a thoughtful cash strategy makes sense.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
Want to receive these weekly? Subscribe here
Enjoy your weekend,
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
For index definitions, click here
AdTrax 8058358.1 Exp 6/26