How much cash should I keep in savings?
The recommended amount of cash to keep in savings for emergencies is three to six months' worth of living expenses. If you have funds you won't need within the next five years, you may want to consider moving it out of savings and investing it. How much money do experts recommend keeping in your checking account?
Keep a Couple Thousand Dollars at Home
In some cases, especially if you have a larger family or are facing a national emergency, having a larger amount of cash around could be helpful. That's why Scott Lieberman, founder of TouchdownMoney.com, suggested keeping $1,000 to $2,000 at home.
Bottom line. Saving $10,000 is a great financial head start, and putting that money to work can help you grow your wealth even faster. There are numerous ways that you can deploy that money to help yourself in the future.
The government has no regulations on the amount of money you can legally keep in your house or even the amount of money you can legally own overall. Just, the problem with keeping so much money in one place (likely in the form of cash) — it's very vulnerable to being lost.
Bottom Line. Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work.
It's a good idea to keep a small sum of cash at home in case of an emergency. However, the bulk of your savings is better off in a savings account because of the deposit protections and interest-earning opportunities that financial institutions offer.
“Individuals should limit the amount of money in savings accounts to the amount they need to live for two months as long as they can easily access their funds in a safe money market account that pays much higher interest,” said accredited financial counselor Camille Gaines, founder of Retire Certain.
In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
If you're following the expert recommendation for emergency funds, you'd need to save three to six months' worth of expenses. Using $4,000 as an example again, that would mean keeping $12,000 to $24,000 in savings. You might decide to aim for nine to 12 months' of expenses instead if you'd like a larger rainy day fund.
Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
How many people have $10,000 in savings?
Savings account balance | Percentage of respondents |
---|---|
$500 to $1,000 | 8% |
$1,001 to $5,000 | 22% |
$5,001 to $10,000 | 8% |
$10,000 to $20,000 | 7% |
18% said their saving were at least $1000 but under $10,000, while 11% each had $10,000 to $49,999 and $50,000 or more saved up. A substantial share of respondents—17%—preferred not to answer.
Financial institutions are required to report cash deposits of $10,000 or more to the Financial Crimes Enforcement Network (FinCEN) in the United States, and also structuring to avoid the $10,000 threshold is also considered suspicious and reportable.
The Legality of Hoarding
In essence, hoarding is not illegal. However, once an individual or company begins to buy up or stockpile large amounts of a commodity or security, the Securities and Exchange Commission (SEC) watches closely.
Generally, there's no set maximum limit for cashing checks. However, banks are required to report transactions over $10,000 to the government, as part of measures against money laundering.
According to the U.S. Bureau of Labor, the average U.S. annual salary in Q4 of 2023 was $59,384. This is up 5.4% from the same time period in 2022, when the average American was making $56,316 per year. Average weekly earnings reached $1,142, while the average American made $4,949 per month in Q4 of 2023.
You can retire comfortably on $3,000 a month in retirement income by choosing to retire in a place with a cost of living that matches your financial resources. Housing cost is the key factor since it's both the largest component of retiree budgets and the household cost that varies most according to geography.
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items.
Cash savings lose value over long periods
It's obviously important and prudent to have savings that you can dip in and out of for everyday use or emergencies. However, cash can potentially start to lose value over long periods of time if the interest rate you're receiving is lower than the rate of inflation.
For financial security, keep some cash in the bank. Double emphasis on some, because there are good reasons not to keep too much money in cash, too. Inflation decreases the value of any money you hold in cash. Inflation, aka rising prices over time, reduces your purchasing power.
Is it OK to keep cash at home?
While it's perfectly OK to keep some cash at home, storing a large amount of funds in your house has two significant disadvantages: The money can be lost or stolen.
Funds Transfer and Travel Rule Requirements
Treasury regulation 31 CFR Section 103.33 prescribes information that must be obtained for funds transfers in the amount of $3,000 or more.
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.
The Takeaway. Your money is safe deposited in a checking or savings account as long as it's at a federally insured credit union or bank and you practice good cyber hygiene.
Also, nearly one in four (22 percent) U.S. adults said they have no emergency savings. Despite economic challenges, the percentage remains relatively unchanged year-over-year. In 2022, 23 percent of Americans had no emergency savings.
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