Digital payment platforms like Venmo, PayPal and CashApp have changed the way we use and keep physical cash on hand. Most people rarely keep cash on their person, much less at home. A recent GOBankingRates survey found that the majority of Americans (70%) keep $500 or less at home, while 14% keep between $500 and $1,000, 7% keep between $1,000 and $2,000, 4% keep between $2,000 and $3,000, and 5% keep more than $3,000 at home.
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While you may not want to keep thousands of dollars in cash stashed in your home, there are always unexpected events that can lead to a necessity for having a bit of cash on hand, particularly emergencies ranging from catastrophic weather — like hurricanes and wildfires — to power outages. If you can’t access your digital currency or banking systems are down, having cash can allow you to get gas, food and medicine with ease.
However, just how much cash should you have on hand? We asked experts to weigh in and the answer is: It depends.
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Keep Cash to a Minimum
From a security point of view, cash is the most insecure asset you can have. Keeping the amount of cash you have in the house to a minimum in the case of fire or theft is a good rule of thumb, said Ryan McCarty, CFP, lead advisor at Castle Rock Investment Company. However, the “minimum” you should keep at home is up for debate among financial experts.
Danielle Miura, CFP, owner of Spark Financials, suggested that “you should keep enough money on hand to get you a couple of gallons of gas, pay for a delivery tip or to help in unfortunate events.” To her, this means around $100 to $200.
“Emergency funds should not be held at your home,” Miura added. “They should be stored in a high-yield savings account of your choice.”
McCarty framed it more in terms of a ratio: “In terms of amount, don’t let your cash exceed 10% of your overall emergency fund and/or $10,000.”
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Have Enough for Emergency Expenses
Yasmin Purnell, founder of the finance website The Wallet Moth, suggested that you keep enough cash on hand in case of an emergency that would require you to access “temporary accommodation, food and drink, gasoline and medication.”
“As a general rule of thumb, having access to $1,000 in cash at home would ensure you can at least pay for immediate expenses in the case of a national emergency,” she said.
Why You Might Want To Keep Less Than $1,000
Jesse Cramer, associate relationship manager at Cobblestone Capital Advisors, believes less than $1,000 is ideal.
“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.”
To drive home this point, he shared that his parents’ neighbors wound up badly burned in a house fire because they were trying to find their hidden stockpiles of cash.
“This is an extreme example, but the point stands,” Cramer said. “In today’s world of ubiquitous credit cards, Apple Pay, PayPal, Venmo, etc., there aren’t enough good reasons to keep large amounts of cash in the house.”
Keep Your Cash Safe
No matter how much cash you keep at home, you’ll want to keep it safe, said Matthew Dailly, managing director at Tiger Financial.
“You’ll need to locate safe havens for it,” he said. “The loss of a large amount of cash can happen in a matter of seconds if your home is damaged by a flood or fire. Fireproof safe storage is a good idea.”
For security purposes, money should be kept in a bolted-down safe along with any other valuables in the home, Castle Rock Investment Company’s McCarty said.
“Make sure the safe is fire and waterproof to avoid any damage. Make sure you deposit and replace the money on occasion so that the bills don’t get too old.”
Jay Zigmont, Ph.D., CFP, founder of Childfree Wealth, offers another word of caution: “Having money on hand comes with the threat of theft or loss, but also, it may be a challenge for you to not spend it. I’ve heard of people freezing the money — literally — or giving their spouse or child the key to the safe [so that they do not have easy access to spend the money]. Figure out a balance that works for you.”
Don’t Panic
When things get bad, people tend to panic, and taking out a lot of cash to protect against emergencies can actually work against you. Contrary to popular belief, you are already protected from a bank failure, Tiger Financial’s Dailly said.
If a bank goes under, the standard FDIC insurance is $250,000 per depositor per insured bank, for each account. If you want to secure more cash than that “you can simply divide your fortune among several banks,” Dailly said.
Cash Loses Value
A good rule of thumb is to keep as little cash at home as you think is necessary because cash loses value over time.
“Money in circulation loses value over time [due to inflation],” Dailly said.
Gabrielle Olya contributed to the reporting of this article.
Survey methodology: GOBankingRates surveyed 1,063 Americans ages 18 and older from across the country between Nov. 27 and Nov. 29, 2023, asking 22 different questions: (1) What category best describes your current financial institution?; (2) Have you considered changing banks within the past year?; (3) If you have considered changing banks in the past year, were any of the following factors? (Select all that apply.); (4) Which feature, perk or other offering is most important to you when opening an account with a new institution?; (5) Are you currently satisfied with all of the banking products and services offered by your bank/credit union?; (6) Would you ever have different types of accounts across multiple banks (i.e. checking at Chase, but savings at TD Bank)?; (7) What is your most preferred method of banking?; (8) Which of the following is the biggest factor of you staying with your current bank?; (9) Which of the following bank accounts do you currently use/have open? (Select all that apply.); (10) How much is the minimum balance you keep in your checking account?; (11) How much do you currently have in your savings account?; (12) What amount of a sign-up bonus would make you consider switching banks?; (13) Have you considered using any app-only banking platforms (aka neobanks) in the past year (e.g. Current, Chime, Dave, etc.); (14) How important is it to you for your bank to be affiliated with a crypto exchange/platform?; (15) In the past year, how often have you written a physical check?; (16) When was the last time you visited your bank in person?; (17) Why would you choose to visit your bank in person? (Select all that apply.); (18) Have you had an overdraft on your checking account in the past year?; (19) How much do you trust your current bank to act in your best interest?; (20) How much do you trust your current bank to protect your private information?; (21) Do you trust regional banks more than national banks?; and (22) How much cash do you keep at home? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: Here’s How Much Cash You Need at Home, According to Experts
