Do You Have Too Much Cash?
Most people are worried about not having enough cash. But here’s a question you don’t hear often, could you actually be holding on to too much?
Having a big pile of cash might feel safe. But if it’s just sitting there, it could be quietly costing you thousands of dollars every year.
The Problem With Excess Cash
More often than not, extra cash is parked in a bank account earning somewhere between 0.1% and 0.5% interest. Meanwhile, inflation is eating away at your purchasing power year after year.
For example:
If inflation is 3% and you have $50,000 sitting in your account, you lose about $1,500 in purchasing power in a year.
Earning 0.5% interest would get you $250 back, so your real loss is still $1,250. Yay! …Not.
Now compare that to investing the same $50,000 and earning an average 8% return:
That’s $4,000 in growth.
Subtract the $1,500 inflation hit, and you’re still ahead by $2,500.
That’s the cost of letting your money stay on the sidelines.
The Balance You Actually Need
Here’s the tricky part, you can’t have all your cash invested in the market. You have bills to pay, and the market isn’t guaranteed to go up over short periods.
That’s where the emergency fund comes in.
Most people should keep 3–6 months of living expenses in cash that’s easily accessible.
Example: If your necessary bills total $5,000/month, your emergency fund should be $15,000–$30,000.
This gives you breathing room for a job loss, car repairs, or a home emergency.
Once that’s covered, the extra cash can be put to work earning more than your savings account will ever offer.
Separating Short-Term Goals
If you’re saving for something in the next 1–3 years (like a wedding, car, or down payment), keep it separate from your emergency fund.
Open a dedicated savings account for each goal.
Automate transfers so you hit your target on time.
Pro tip: If it’s a short-term goal, don’t invest that money. Keep it safe.
The False Sense of Security
It’s easy to think, “The more cash I have, the safer I am.” But too much cash can quietly hold you back. You’re trading long-term growth for a short-term feeling of comfort. The key is to keep enough cash to protect yourself — but not so much that it slows you down.
Quick Action Steps
Add up your true monthly expenses.
Multiply by 3–6 to find your emergency fund “sweet spot.”
Move anything over that number into a higher-yield savings account or investments that fit your goals.
Bottom Line
Money is a tool, not a trophy. Don’t let it sit on the sidelines when it could be working for you.
If you’re not sure how much cash is enough, or where to put the rest, that’s exactly what I help clients figure out. Let’s talk.
