It’s probably one of the very first personal finance tips your parents ever told you: always carry cash.
While we may mistake this age-old advice as more of a generational preference, there is some validity to it. After all, there are plenty of perks to having cash in your wallet. For one, when you have to physically count out cash to pay for a transaction, you can get a better sense of your spending.
Cash can also be great to have on hand in case of emergencies. For example, you may find a vendor that doesn’t accept credit or perhaps you have a low-limit on your credit card and, in this case, cash is a reliable back-up.
The big question that remains is: How much cash should you carry every day?
Select spoke with a few personal finance gurus for their guidance and found their responses vary, from carrying as much cash as you plan to spend that day to keeping less than $100 in your wallet. Ultimately, like most personal finance advice, you have to decide what’s best for you. (But your mom will probably sleep easier at night if you have at least an emergency $20 tucked in there.)
Carry at least a day’s worth of expenses
It’s a good idea to keep at least a day’s worth of expenses in cash, suggests Brenton Harrison, a Tennessee-based CFP at Henderson Financial Group.
While this can vary depending on your day-to-day spending habits, Harrison recommends thinking of how much money you rely on to get through your normal 24 hours. This may include commuting expenses, such as paying highway tolls or parking fees.
Consider that some businesses — convenience stores or coffee shops — still operate cash-only or may not accept certain credit cards. And as you venture out more now that things are opening back up, keep in mind that cash can be handy for social events.
“You may be eating with friends at a restaurant that doesn’t split checks or want to tip a person providing a service, like a barber or a babysitter,” Harrison says. “Whatever your reason, having enough cash to get through the day can be helpful.”
Carry $100 to $300
Given that today’s digital-focused world makes it easier than ever to pay via credit cards or with apps like Apple Pay, Venmo and PayPal, there really is little need for cash these days, argues Shon Anderson, an Ohio-based CFP and chief wealth strategist at Anderson Financial Strategies.
“We would recommend between $100 to $300 of cash in your wallet, but also having a reserve of $1,000 or so in a safe at home,” Anderson says. Depending on your spending habits, a couple hundred dollars may be more than enough for your daily expenses or not enough. Regardless, the idea here is that you have some back-up cash on hand should you need to pay for something but you can’t use a card or app.
Carry less than $100
“At one point in time, cash was king,” says Anand Talwar, deposits and consumer strategy executive for Ally Bank. “But cash is losing its luster in today’s unlimited digital payment world.”
Talwar does agree with Harrison and Anderson, however, that having some cash in your wallet is useful. He recommends keeping the amount at or below $100 so it serves as a budgeting tool.
“That amount gives you the psychological boost of having cash in your wallet and makes you think twice about your spending,” Talwar adds.
You might also decide to pay with cash when shopping at a local businesses, as many prefer cash over cards to avoid the fees. This could be even more of an incentive to carry cash as we emerge from the pandemic.
Supplement your cash with credit
While cash can be useful to have on hand, a credit card is much more secure than carrying around a wad of dollar bills in your pocket. Plus, using a credit card responsibly (paying off your balance in full and on time every month) can help you build a better credit score.
Use only cash, and you’ll also miss out on perks and rewards that you can score with a credit card, such as cash back on certain purchases.
For example, the new Citi Custom Cash℠ Card lets cardholders earn 5% cash back on purchases in their top eligible spend category each billing cycle, up to the first $500 spent (then 1%).
With eligible spending categories including everything from restaurants and grocery stores, to gas stations, select travel, select transit, select streaming services, drugstores, home improvement stores, fitness clubs and live entertainment, there’s a good chance you’ll benefit every time you swipe.
You can also count on no annual fee and a lengthy interest-free intro period with the Citi Custom Cash Card: 0% APR on balance transfers and purchases for the first 15 months (after, 13.99% to 23.99% variable APR). This can help buy you some additional time before the balance needs to be paid off in full. Just make sure you make at least the monthly minimums and have a plan to pay off the balance before interest starts accruing.
