Don't Keep Too Much Money in Your Account, Maximum This Amount According to Experts

Amid the current ease of access to investments, the habit of keeping funds in bank accounts is being abandoned by some people. Nevertheless, the principle of ‘cash is king’ is still considered relevant. Cash remains viewed as the safest asset, especially during uncertain economic times or crises.

So, how much ideal cash should one keep?

Financial planners generally suggest that the funds kept in an account should be sufficient to meet needs or pay bills for one month. Keeping too much cash also carries several risks, from fraud, inflation eroding the value of money, to potential transaction errors.

“Savings accounts often lack the protections that credit cards have,” meaning that “funds can be harder to recover” if your card is compromised, said Jessica Goedtel, a certified financial planner in Pennsylvania, as reported by CNBC Make It.

Therefore, hoarding large amounts of cash in an account is not a wise step. In fact, according to Gregory Guenther, it’s enough to keep funds for one to two weeks’ needs in the account, while the rest can be allocated to more productive instruments.

“If it’s too little, you’ll feel anxious about every swipe; but if it’s too much, you’ll miss out on growth in accounts with higher returns. The right point is personal, but it will allow you to live without having to double-check your balance before buying groceries,” Gregory emphasised.

Although maintaining a healthy cash balance can help you avoid bank admin fees that often cause head-scratching, that fund is not a substitute for an emergency savings fund.

Emergency savings are intended for unexpected major expenses, such as medical bills or job loss.

Financial planners typically recommend setting aside emergency savings equivalent to three to six months in a separate, easily accessible place, such as a high-interest savings account. That way, the money is available whenever you need it and without risk.