How Much Cash You Really Need (2024)

In every stage of life, having a financial cushion (cash on hand) can prepare you for potential emergencies and provide some peace of mind.

While most experts recommend maintaining three to six months' worth of basic living expenses in an emergency fund, the amount of cash you really need depends on a few factors, including your current life and financial situation, your risk tolerance and your goals.

Consider your situation

Determining how much money you need depends largely on your current financial needs and risks.

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"If you're single, you might be comfortable with less than six months of savings," says Carl Holubowich, CFP, Principal at D.C.-based financial planner, Armstrong, Fleming and Moore. "But if you have a spouse, kids and a mortgage, or if you worry about replacing a lost job or other income quickly, you likely need six months or even more."

Putting more cash in savings is also a good idea for prospective homebuyers who want to establish a sizable down payment.

If you're nearing retirement, you may want more than the standard six-month requirement to preserve the wealth you've built in case there's a bear market and your investments don't meet your expectations.

"Keeping two- or three-years’ worth of expenses can provide a safety net to help get you through a down stock market," says Holubowich.

Evaluate your risk tolerance

Consider the degree of risk that you're willing to endure. The term is generally used for investors who can experience a lot of short-term volatility with their investment portfolios, but it can also apply to emergency savings.

If you tend to feel a lot of anxiety about a potential job loss or other major financial emergency, it may make sense to save more money to put your mind at ease. But if you're less worried about emergency expenses that may or may not happen, and you'd rather use your money for other financial goals, a smaller emergency fund may be a good fit for you.

Align your savings with your goals

While a solid emergency fund is important for managing financial risks, it's just one aspect of your overall financial plan. Depending on your cash flow, you may be able to work toward multiple savings goals at the same time, or you may need to prioritize one goal at a time.

The key is to consider the benefits of all of your financial goals to determine how to manage your money more effectively.

If your employer offers a 401(k), complete with a contribution match, for instance, it may make sense to maximize that match instead of putting that money into a savings account because it's essentially a 100% return on your investment and can accelerate your retirement savings plan.

If you have high-interest credit card debt, it could be a good idea to build up a small emergency fund to give you a buffer, then tackle your debt to free up more cash flow once you pay off your card's debt.

Determine hard numbers for your situation

As you consider your current situation, risk tolerance and goals, come up with a figure for cash on hand that will give you peace of mind. You may land on this number based on your monthly income or basic necessities, or you may simply use a flat amount that makes you comfortable.

Whatever you do, take your time to understand your situation, so you can come up with an amount that works best for you.

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How Much Cash You Really Need (2024)


How Much Cash You Really Need? ›

It's reasonable to use three to six months worth of living expenses as a starting point when setting your cash allocation. You can then refine that number based on your estimation of your job security, how long it would take you to replace your job if you lost it, and so on.

How much cash should you actually have? ›

In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses. Everything starts with your budget. If you don't budget correctly, you don't know how much you need to keep in your bank account.

How much cash you need to have? ›

While you're working, we recommend you set aside at least $1,000 for emergencies to start and then build up to an amount that can cover three to six months of expenses. When you've retired, consider a cash reserve that might help cover one to two years of spending needs.

Is $100,000 in cash too much? ›

There's no one-size-fits-all number in your bank or investment account that means you've achieved this stability, but $100,000 is a good amount to aim for. For most people, it's not anywhere near enough to retire on, but accumulating that much cash is usually a sign that something's going right with your finances.

Is $20,000 a good amount of savings? ›

Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.

What is the 3000 cash rule? ›

Funds Transfer and Travel Rule Requirements

Treasury regulation 31 CFR Section 103.33 prescribes information that must be obtained for funds transfers in the amount of $3,000 or more.

How much cash does the average person carry? ›

Many Americans do carry cash, on average about $67 as of 2021, according to the Federal Reserve's Diary of Consumer Payment Choice.

How much do most people have in savings? ›

How much do Americans have in savings? Overall, Americans have a median of $5,300 and an average of $41,800 in savings, according to the Federal Reserve.

How much cash should the average person keep at home? ›

“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.”

How much cash can you keep at home legally in the US? ›

While it is legal to keep as much as money as you want at home, the standard limit for cash that is covered under a standard home insurance policy is $200, according to the American Property Casualty Insurance Association.

How many Americans have $100,000 in savings? ›

Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.

How many people have 100K cash saved? ›

Most Americans are not saving enough for retirement. According to the survey, only 14% of Americans have $100,000 or more saved in their retirement accounts. In fact, about 78% of Americans have $50,000 or less saved for retirement.

Is $20,000 a lot of cash? ›

Meanwhile, you might have a fairly large savings balance to the tune of $20,000. That's definitely a lot of money. And in some cases, that might constitute a really robust emergency fund. But in some situations, a $20,000 emergency fund might also leave you short.

How many people have $20,000 in savings? ›

Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.

What percent of Americans have 20k in savings? ›

Most Americans have $5,000 or less in savings
Savings account balancePercentage of respondents
$500 to $1,0008%
$1,001 to $5,00022%
$5,001 to $10,0008%
$10,000 to $20,0007%
3 more rows
Oct 18, 2023

How much should I have saved by 40? ›

As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary. 50: Six times your salary.

How much should a 30 year old have saved? ›

Fidelity suggests 1x your income

So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards. Assuming that your income stays at $50,000 over time, here are financial milestones by decade. These goals aren't set in stone. Other financial planners suggest slightly different targets.

What is a reasonable amount of cash to keep at home? ›

“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.”

How much cash is considered rich? ›

Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

How much cash should you have by 30? ›

Savings by age 30: the equivalent of your annual salary saved; if you earn $55,000 per year, by your 30th birthday you should have $55,000 saved. Savings by age 40: three times your income. Savings by age 50: six times your income. Savings by age 60: eight times your income.


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