Where to Keep Your Cash Money

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How much cash should you keep on hand?  That’s a question that comes up with every client, and rightfully so: too little and you’ll be unprepared for emergencies or unexpected expenses, but too much and you won’t be investing your money wisely.  While the answer depends on your goals and personal circumstances, here are some rules of thumb that apply to just about everyone.

  • Checking: Maintain enough to cover your current month’s expenses.
  • Short-term Savings: Set aside monthly savings to help cover large and infrequent annual spending such as annual insurance premiums, vacations, and tuition payments. 
  • Emergency Savings: At a minimum, keep 3 months’ worth of living expenses and debt payments in cash in a separate account.
  • Down Payment Savings: For those of you planning to purchase a home in the next couple years, keep a dedicated savings account for these funds.
  • Other Large Purchases: Consider additional savings accounts if you’re preparing to purchase a car or some other large expense in the next two years.

I recommend keeping cash in a high yield, FDIC insured savings account such as Capital One 360 or Ally. I like Capital One 360 because it allows you to open up multiple savings accounts and label them according to purpose (e.g., emergency savings, vacation savings). Check out this current review of top rated high yield savings accounts.


Here are two interesting articles I read this month:


How Many Bank Accounts Should You Really Have?
By Rachel Morgan Cautero, DailyWorth

Check out this article for a deeper dive into how many bank accounts are right for you.


Ask the Sketch Guy: Should I Finally Buy Some Bitcoin?
By Carl Richards, The New York Times

I’m getting more questions about cryptocurrency lately. This article sums up my advice for most people. Here’s another insightful piece from Forbes on these investments.

In short, I see speculative investing as gambling–you have to be comfortable losing everything.  Risking anything above a trivial amount is not advisable. While the potential upside is alluring, the significant risk of loss is incompatible with prudent investing for long-term goals like college savings, buying a home, or retirement. Remember: prudent investing should not be exciting.