This is a conversation I have with all of my clients. This is also a question I cannot answer for them. How much cash is enough is really a personal preference. Many people look to accumulate between 3 – 6 months of expenses as a minimum. Some of my clients are happy with $10,000 – $15,000 in cash; others don’t feel comfortable with less than $100,000. Let’s look at few reasons why you may want to keep cash, even with earning little or nothing on that asset.
Emergency funds:
We are in the middle of hurricane season; this is a great reason to have paper money in your house + cash reserves in the bank. During the 2004 hurricane season, we lost power a lot, had roof damage, and lost other items. Yes, we have insurance, but you do not get reimbursed quickly. Medical emergencies are often the biggest drain on finances, often driving people to bankruptcy. Another reason to keep a nice cash buffer is in case of downsizing.
What is on your bucket list?
Is there a special trip you wish to take? A dream car to buy? Funding an education? Buying a vacation home? Saving funds for a big down payment or to completely pay cash for a bucket item list is another reason to build up cash reserves.
Life cycle events can be expensive.
Do you have a child that is getting ready for college or grad school? What about a wedding or Bar Mitzvah? How about that youngest kid moving out and you want to downsize but have to replace your roof first? Life cycle events often cost more than we think because emotions tend to bump up the spending.
Whatever your reason is, look at your life and determine for yourself how much cash is enough.

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