Everyone should keep cash on hand at the bank for emergencies and expenses, but keeping more than you need is counterproductive. Those are excess dollars that could be used to move you closer to your goals.
For example, if you kept $50,000 more than you needed at the bank, and you could have invested and made an extra 7% per year, after 30 years you missed out on $330,000.
So how much should you have at the bank?
The rule of thumb is to keep three to six months’ worth of expenses in an emergency fund in case of job loss or to pay for things that break or go wrong. When money is used from the fund to cover an emergency, there should be a plan to pay the money back over time. Emergency savings should be kept in its own FDIC insured bank account separate from checking, and never invested in something that can lose value or has surrender penalties. There are exceptions to these rules of thumb and I recommend speaking with me about your situation before setting a savings goal, or to see where you fall between the 3-6 months.
In addition to your emergency savings, you should also try to keep dollars on hand for large upcoming expenses (i.e. windows, roof, new bed, new car, etc). It’s best to save for those expenses in an account that is kept separate from your emergency savings.
Also, as you age, keeping extra money on hand for potential long-term care and other healthcare costs can also make sense, depending on your situation.
My goal is to help people use their dollars as efficiently as possible. In order to do that, we need to know your lifelong goals and then build a strategy based on that. If you think you might have too much at the bank, please call me today to discuss your situation in detail to see if there is a better use of your assets.
Komentarze