The Truth About Cash And How Much You Should Carry

Is it necessary to carry cash nowadays, with digital payments so common? Cash is king, as the cliché goes, yet it appears to be becoming increasingly obsolete in today’s environment. Venmo allows friends to pay each other, delivery apps feature digital tipping choices, and even tiny stores increasingly take credit and debit cards.

There is a decline in the necessity for cash beyond personal preference, says Mark Sanchioni, chief banking officer of Ridgewood Savings Bank in New York.

According to Erin Wood, executive vice president of financial planning and advanced solutions at the Omaha, Nebraska-based financial firm Carson Group, a preference for cash may be generational. Older people may desire some cash in their wallet, while young persons may not see the need given the opportunity to send money through applications such as Venmo and PayPal. “That is cash on hand for them,” she explains.

Despite all of the digital payment options accessible today, there may be occasions when you’d like to keep some cash in your pocket. Learn how much cash you should keep on hand by reading on.

When and Why Should You Carry Cash?

There are varying views on the necessity of carrying cash daily. Sanchioni, for example, claims that he seldom sees circumstances where cash is necessary. Others feel it is prudent to always keep some cash on hand.

Lamar Brabham, CEO, and founder of Noel Taylor Agency in North Myrtle Beach, South Carolina, says it all comes down to having access in an emergency or an opportunity. Some small businesses, for example, may give cash discounts, but you will only be able to take advantage of this if you have some money in your wallet. Similarly, having cash on hand might be useful in emergency scenarios.

Wood cites a small gas station in her region that had had a technical issue processing card payments. Others with an empty tank and some cash could fill up enough to go to the next gas station, while those without cash had to pray for a withdrawal from an ATM.

While there is debate regarding whether cash is required for everyday spending, there is an agreement that travelers should carry cash in the local currency at all times. Wood recommends bringing enough for 24 hours, especially when going abroad. You may not know where you’ll be able to get cash next, she explains.

Pitfalls of Carrying Cash

While cash can be useful in some instances, its vulnerability to theft is one of the reasons it has fallen out of favor with many people.

There is a risk to carrying paper currency, Sanchioni warns. How much you carry represents your willingness to sacrifice. It is possible to cancel a stolen debit or credit card and have fraudulent transactions reversed. When it comes to cash, though, once it’s gone, it’s gone. There aren’t many methods to protect funds, Wood explains, and cash can’t be tracked.

When it comes to avoiding being pickpocketed or your purse snatched, try distributing it across many areas, such as different pockets.

Another disadvantage of using cash is the development of cashless retailers. Although it is still uncommon, some shops choose not to accept cash, especially in light of the COVID-19 outbreak. However, if enacted and signed into law, the Payment Choice Act, a measure presently before Congress, would oblige shops to accept cash payments for sales under $2,000.

How much cash should I have on me?

No one quantity of cash is appropriate to carry in all circumstances, and it truly depends on the person, adds Brabham. Based on your spending patterns, he recommends $100-$500. For example, if you want to conduct your holiday shopping at a craft or fine arts fair, carry additional cash because some merchants may provide discounts for these payments if you ask. If you pay cash, you can get a reasonable price, Brabham says.

While Wood recommends bringing enough money to cover expenditures for 24 hours while traveling, she believes that $20 is plenty for most individuals to carry daily.

If you frequently tip, having additional cash on hand is a good idea, but Sanchioni points out that gratuities may be added to many digital purchases.

What is the recommended amount of cash I should keep at home?

In an emergency, some people prefer to have cash on hand, but Sanchioni believes there are very few circumstances that would prevent a person from going to an ATM if cash is required. Natural calamities, such as hurricanes, may necessitate having some cash on hand.

In many circumstances, a few hundred dollars may be enough, and people should be cautious about where they keep their money. A store-bought home safe, for example, may create a false impression of security. They may be hauled out of your house, explains Sanchioni.

As with carrying cash on your body, it may be a good idea to keep cash at home in many locations, especially if you have a large quantity. Some inventive individuals hide cash in unexpected locations, such as a bag of meat in the freezer.

If you have a lot of cash in your house, don’t tell anyone about it, or you’ll become a target for thieves. However, you should ensure that your heirs can access the funds if you die unexpectedly. Note where it is in your estate planning paperwork, or share the information with one trusted person.

Wood suggests keeping your cash in a bank-safe deposit box as a more secure solution.

How Much Is Cash Too Much to Have on Hand?

Having some cash on hand might give security, but having too much can be a financial disaster. Having a couple thousand in cash would be the upper limit for the normal person, Brabham adds.

Beyond that, you are foregoing the ability to earn interest on money stored in a bank. The FDIC protects deposits at member institutions up to $250,000 per depositor, which ensures your money is safe. It is hard to find someone who has lost money in their FDIC-insured accounts, Sanchioni says.