Maximum Amount of Cash to Keep in a Bank Account According to Financial Experts

In the midst of the current ease of access to investments, the habit of saving money in banks is being abandoned by some people. Nevertheless, the principle of cash is king remains relevant. Cash is still considered the safest asset, especially during uncertain economic conditions or crises.

So, what is the ideal amount of cash to keep?

Financial planners generally suggest that the funds in the account should be sufficient to cover needs or bills for one month. Keeping too much cash actually carries risks, such as fraud, inflation eroding the value of money, and potential transaction errors.

“Savings accounts often lack the protections that credit cards have,” meaning that “funds can be more difficult to recover” if your account is hacked, 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 is enough to keep funds for one to two weeks’ needs in the account, while the rest can be allocated to more productive instruments.

“If you have too little, you will feel anxious about every swipe; but if you have too much, you will miss out on growth in accounts with higher returns. The sweet spot 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 are usually quite irritating, those funds are not a substitute for an emergency savings fund.

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

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