The primary purpose to hold cash in your savings account is to bolster against emergencies and unexpected expenses. In other words, a cash storage acts as an emergency fund. However, holding too much of your portfolio as cash – as opposed to investing in the stock market, for example – means that you are both disproportionately exposed to the dangers of inflation and not optimally employing your capital for investment.
So, the logical question is just how much you should have in savings to create a balance between preparing for financial emergencies and engaging in optimal financial planning.
The post How Much Cash Should I Have On Hand? originally appeared at Barbara Friedberg Personal Finance.