How Much Cash Should I Keep at Home: A Practical Guide

How Much Cash Should You Have At Home

We naturally wonder how much cash we should keep at home, especially as we grow older and become more concerned about financial stability in times of uncertainty. While most financial transactions have shifted to digital platforms, there’s still a need for physical cash in emergencies. The burning question is, how much money should we keep at home to ensure we’re prepared for unforeseen situations?

This question has various answers, as the right amount of cash to store at home can vary depending on individual circumstances and preferences. Consider our monthly expenses, the likelihood of emergencies in our area, and our overall savings strategy. So, how do we determine the optimal amount of cash to keep in our homes for emergencies?

One important distinction is that this is not an emergency fund but cash-on-hand. Literally dollar bills (or otherwise, see below) in case of extreme emergency.

One suggestion is to follow a simple rule proposed by my Cashflow Tactics mentors, who recommend keeping one month’s salary at home. This amount can cover various expenses in case global banking systems become unavailable. I’ve personally experienced it when banks and ATMs just close, and it can be pretty inconvenient.

Another suggestion is access to at least $1000 in cash at home to pay immediate expenses during a national emergency. Ultimately, the decision is in our hands, as we must be comfortable with how much cash we store at home.

Key Takeaways:

  • Emergency Cash Reserve: Keeping a certain amount of cash at home for emergencies is recommended. This is not an emergency fund but cash-on-hand for extreme situations.
  • Amount of Cash: The amount of cash to keep at home can vary depending on individual circumstances. One suggestion is to keep one month’s salary or at least $1000 at home.
  • Reasons to Keep Cash at Home: Cash at home can be useful in emergencies, natural disasters, power outages, and bank failures. It provides a safety net and peace of mind.
  • Determining the Right Amount of Cash: Assessing personal needs, adhering to the 50/30/20 budgeting rule, and maintaining an appropriate emergency fund ratio can help determine the right amount of cash to keep at home.
  • Storing and Securing Cash: It’s important to store cash safely at home. This involves choosing a suitable home safe, ensuring fire and water protection, and dividing cash into various denominations.
  • Alternatives to Cash at Home: Diversifying wealth through alternatives such as precious metals, whole life insurance cash value, cryptocurrency, bank and credit union accounts, and high-yield savings accounts can provide financial security.
  • Balancing Cash with Other Financial Priorities: Managing and paying off debt, establishing clear savings goals, investing wisely, and pursuing financial freedom are essential aspects to consider alongside keeping cash at home.

Reasons to Keep Cash at Home

Reasons To Keep Cash At Home
Reasons To Keep Cash At Home


We all face unexpected emergencies at times, and having cash at home can be helpful in these situations. When we need to cover expenses immediately and can’t access our bank accounts, knowing we have some cash readily available is comforting. It provides a safety net for unforeseen circumstances and offers peace of mind.

Natural Disasters

Accessing bank accounts or ATM services might be impossible during natural disasters like hurricanes, earthquakes, or floods. Roads may be blocked, power outages widespread, and the internet may be down. In these scenarios, having cash at home can be a lifesaver. We should consider keeping adequate money to cover essential supplies like food, water, and medication during the critical period following a disaster.

I’ll lump in the global health emergency we all experienced in 2020 as a natural disaster.  

Power Outages

Sometimes, power outages can happen unexpectedly and last for several hours or even days. With electronic payment systems rendered useless, we must rely on cash to make necessary purchases. Keeping money at home ensures we can still function – getting fuel, purchasing groceries, or paying for essential services – until power is restored.

Bank Failures

While rare, bank failures can and do happen, leaving account holders temporarily unable to access their funds. In such situations, having cash at home allows us to care for our financial needs while waiting for the issue to be resolved. Being prepared for such events helps protect our economic well-being.

Determining the Right Amount of Cash

Determining the Right Amount of Cash
Determining the Right Amount of Cash

Assessing Your Needs

How much cash to keep at home can be challenging as we navigate life. The first step to finding the right balance is assessing our needs. Consider the bills we must pay and our daily, weekly, or monthly spending habits. By keeping track of our expenses, we can determine a suitable amount of cash on hand to cover any unexpected situations.

The 50/30/20 Rule

One proper budgeting method is the 50/30/20 rule, which can help us better manage our finances. According to this rule, we allocate 50% of our income to cover essential needs, 30% for discretionary spending, and 20% for savings and debt repayment. By following this guideline, we can ensure that we have sufficient cash at home and maintain a healthy financial lifestyle.

50% – Essential needs (rent, utilities, groceries, insurance)

30% – Discretionary spending (entertainment, dining out, hobbies)

20% – Savings and debt repayment

Emergency Fund Ratio

An emergency fund is crucial for unforeseen events like job loss or medical emergencies. Many suggest setting aside a minimum balance in our bank account (or equivalent), equivalent to three to six months’ worth of essential living expenses. This emergency fund ratio ensures we can cover our costs without resorting to high-interest loans or draining our savings.

However, suppose your job is more commissions based, or you are an entrepreneur. In that case, as much as one year of money set aside as an emergency fund may be more appropriate.

In terms of cash at home, a practical approach (mentioned above) is to keep an amount of roughly one month’s salary in cash. $1000 would be a starter amount, giving us easy access to cash while avoiding the risks of keeping large sums at home.

So, are we keeping the right amount of cash at home? By assessing our needs, adhering to the 50/30/20 rule, and maintaining an appropriate emergency fund ratio, we can confidently say that we are well-prepared for life’s unexpected challenges.

Storing and Securing Your Cash

As we explore ways to keep our cash safe at home, we must consider various factors, such as choosing a suitable home safe, ensuring fireproof and waterproof protection, and dividing the cash into different denominations.

Choosing a Home Safe

First and foremost, we need a reliable place to store our cash. Investing in a high-quality home safe is a wise decision. A good safe should have a solid locking mechanism, be challenging to crack, and preferably offer additional security features, such as tamper-evident technology or even fingerprint recognition.

Fireproof and Waterproof Protection

When safeguarding our cash, it’s essential to protect it from unforeseen disasters, such as fires and water damage. A fireproof and waterproof safe can offer the necessary protection for our valuables. These safes are designed to withstand high temperatures and keep water out, ensuring the contents remain unharmed even during extreme circumstances. Have we considered investing in a safe that meets these protection standards?

Dividing Your Cash into Denominations

Another essential factor in securing our home cash is dividing it into various denominations. This helps us avoid a situation where we need to break large bills or run out of smaller notes when withdrawing cash. By separating our money into smaller and larger accounts, we can easily access the amounts needed for different transactions. Do we have a balanced mix of denominations in our cash storage?

In conclusion, safely storing and securing our cash at home involves:

  • Considering key factors such as choosing a suitable home safe.
  • Ensuring fire and water protection.
  • Dividing our cash into appropriate denominations.
  • These precautions can provide us peace of mind and ensure our hard-earned money remains secure and easily accessible.

Considering Alternatives to Cash at Home

Considering Alternatives to Cash at Home
Considering Alternatives to Cash at Home

As we explore options for storing our wealth, we must consider alternatives to keeping cash at home. By diversifying and exploring these options, we’re better prepared to ride out any financial storms and adapt to changing economic conditions.  

Delving into these options moves us into what I’d consider “hedging” against dollar currency issues. This is beyond the scope of this article.

With that said, let’s take a look at a few alternatives worth considering:

Precious Metals – Gold & Silver

One option is to invest in precious metals like gold and silver. These have historically held their value during inflation and economic instability. They’re tangible assets that can be readily converted to cash if needed. There are various ways to invest in precious metals, such as buying physical gold or silver bars and coins or investing in exchange-traded funds (ETFs) that track the value of these metals.

Our take and the idea behind having cash at home is the same here. Keep physical gold or silver at your home for true emergencies.

Whole Life Insurance Cash Value

Another alternative is the cash value of a whole life insurance policy. This cash value grows tax-deferred and can be accessed in times of need, such as a financial emergency. It’s important to note that withdrawing from the cash value may reduce the policy’s death benefit, so careful consideration is required before tapping into this resource.

Cryptocurrency & Bitcoin

Cryptocurrency, like Bitcoin, offers a modern approach to storing and transferring wealth. While volatile, its decentralized nature can provide financial independence from traditional banking systems and digital payment platforms like PayPal and Venmo. However, it’s essential to understand the risks involved and adequately secure your digital assets. Are you ready to embrace this digital frontier?

Bank and Credit Union Accounts

A more traditional approach is utilizing bank and credit union accounts, such as savings and checking accounts. These institutions offer federal protections like FDIC insurance for banks or National Credit Union Administration insurance for credit unions, ensuring your money is safe up to certain limits. The key is to balance accessibility with security – keeping enough funds in these accounts for easy access but also minimizing the impact of potential issues like inflation or Fed policies.

High-Yield Savings Accounts

Finally, high-yield savings accounts can be attractive for those wanting more interest than a standard savings account. These accounts typically offer higher interest rates than traditional savings or checking accounts, allowing your money to grow faster. By keeping some of your funds in a high-yield savings account, you can benefit from increased earning potential without sacrificing accessibility.

In conclusion, as we navigate the financial landscape, diversifying our wealth through these alternatives can provide peace of mind and protection from the uncertainties of life. The key is to assess our unique circumstances and choose the options that best align with our goals and risk tolerance.

Balancing Cash at Home with Other Financial Priorities

As we aim to maintain a healthy financial position, it’s essential to consider how much cash to keep at home and how it’s balanced with other financial priorities. This section will discuss key areas to focus on, such as paying off debt, savings goals and investments, and pursuing financial freedom.

Paying Off Debt

One essential aspect of our financial lives is managing and paying off debt. High-interest debt, such as credit card debt, should be prioritized over keeping large amounts of cash at home. When we have substantial debt, allocating more resources toward eliminating it is vital. Not only does this reduce interest expenses and overdraft fees, but it also lowers our overall financial stress.

Savings Goals and Investments

Aside from managing debt, we need to establish clear savings goals. For example, we should allocate funds for an emergency fund to cover at least three to six months of living expenses, which can include a smaller portion of cash kept at home. Furthermore, insurance policies to protect assets and income are crucial, as they prevent setbacks from unforeseen events.

Once we have a solid foundation with our savings, we can consider investment options wisely. Instead of stashing large amounts of money at home, opening an investment account and growing our wealth through other investments like real estate may be more beneficial. This allows us to take advantage of compounding interest and other financial opportunities.

Pursuing Financial Freedom

Ultimately, our goal should be achieving financial freedom, which encompasses clearing debt and meeting savings goals and creating a plan that allows us to live comfortably. Engaging in financial planning can help us navigate and balance our economic priorities. By clearly understanding our finances, we can pave the way to a secure financial future.

Remember, striking the right balance when allocating funds among various financial areas is essential. Keeping too much cash at home can limit our ability to meet other financial goals, such as paying off debt, saving, investing, and ultimately achieving financial freedom.

The Psychology Of Cash – Why We Feel Better With Cash at Home

The Psychology of Cash - Why We Feel Better with Cash at Home
The Psychology of Cash – Why We Feel Better with Cash at Home

The Tangibility of Cash

As we hold physical cash in our hands, an undeniable feeling of reassurance and control comes from its tangibility. Unlike digital money, which can sometimes feel abstract, we can physically see and touch banknotes and coins. This tangibility gives many of us a sense of security and comfort, knowing that we have emergency funds close at hand in times of need. Moreover, being able to count our paper money reinforces its value in our minds.

The Perception of Control

Another significant psychological aspect behind keeping cash at home is the perception of control. When we have cash within reach, we may feel a sense of agency over our lives and financial future. This control contributes to stability and safety, especially as we grow older and encounter situations requiring quick money access. Having cash reserves at home allows us to take action faster without worrying about bank transfers or processing times. Additionally, it acts as an insurance policy in case of technical issues or a temporary disruption to digital banking services.

Keeping reasonable cash at home provides control and peace of mind regarding our financial affairs. Balancing the conveniences of digital options with the tangibility and control provided by physical money is vital for navigating today’s economic landscape.

The Comfort of Readiness

As we grow older and experience the unpredictability of life events, attaining a certain level of financial readiness becomes increasingly crucial. Keeping a reasonable amount of cash at home ensures that we and our families are prepared for unexpected emergencies and expenses.

One question we often face is, how much cash should we keep at home? 

No one-size-fits-all answer exists; it ultimately depends on our financial situations, spending habits, and comfort levels.

When managing our emergency funds, keeping the cash portion within 10% of our general emergency fund or $10,000 is wise. This is per financial planners’ recommendations and to avoid any red flags with the IRS.

So, how can we strike a balance when determining the amount of cash to keep at home? The key lies in personal assessment. We must carefully consider our financial responsibilities, the stability of our income, and the potential emergencies we might face. By doing so, we can create a reliable and personalized plan that suits our needs and guarantees the comfort of readiness.

Frequently Asked Questions (FAQs)

Q: How much cash should I keep at home for emergencies?
A: The amount of cash to keep at home can vary depending on individual circumstances and preferences. One suggestion is to keep one month’s salary at home. Another tip is to have at least $1000 in cash at home to pay immediate expenses during a national emergency.

Q: What are some reasons to keep cash at home?
A: Money at home can benefit from emergencies, natural disasters, power outages, and bank failures. Cash readily available can provide a safety net for unforeseen circumstances and offer peace of mind.

Q: How can I determine the right amount of cash to keep at home?
A: Assess your needs, and consider your bills, daily, weekly, or monthly spending habits. You can also follow the 50/30/20 rule for budgeting and maintaining an appropriate emergency fund ratio.