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Where Do I Keep my Cash?

July 30th, 2009 at 08:44 am

The short answer is that I keep most of my cash in one account. I keep a $1k cushion in my credit union savings account - which I can withdraw or transfer (to my checking) immediately if I needed it. I keep some cash in my ROTHs (will explain below). I do keep most of it in one Online Money Market Account. For the long run I will probably invest in CDs. For now, there is really no reason to (low interest rates, etc.).

I do keep my cash readily accessible (I can write checks from my money market savings) BUT it's not something that tempts me. I don't personally need to "hide it" so I don't spend it.

I do prefer to keep at least $5k cash readily accessible, for emergency. I think my $5k is like Dave Ramsey's version of the $1k mini-emergency fund. I don't think I have ever had less than $5k cash in a savings account, in my adult life.

Right now I am all in money market cash, so to speak, because we have been "low" on cash and I haven't felt comfortable tying any of it up. As the balance grows to my goals, we will need to ladder some CDs, etc. We may even look at some bond funds - I just haven't gotten to that point yet.

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But, let me go back to the beginning. I've said before, our parents were wonderful financial mentors, but taught neither of us about investing. So WHEN we had $50k+ cash in the past, we were really stupid. IT was sitting in our low-interest savings accounts. Our worst financial mistake ever.

I also had an IRA sitting in cash. No one ever advised me to invest it. !

It was around 2006 and more difficult financial times that we decided to earn some interest on our money. Which was ironic since we had blown through most of it by then. But we opened a couple of high-yield money market accounts since then, and that is where most our savings has sat, since. (We had some CDs when we did some credit card arbitrage - CD interest rates were "high" then).

I was also going to invest my pathetic IRA cash, BUT in 2006 interest rates were higher than I had ever seen them as an adult, AND the writing was on the wall with the economy. We were knee deep in the housing bubble and it didn't look good (just as we had been knee deep in the tech bubble a few years before - we lived in the tech capital and my spouse worked in tech). The writing was on the wall so I took a gamble and converted my IRA into a ROTH and then stuck it in a 5.5% CD for 3 years. Turned out to be a good move. IT matures in 2 months and I will probably be able to invest it at much lower stock prices than I would have been able to in 2006. That's the story on that.

Anyway, as we tried to rebuild our cash reserves, from our $5k low in 2006, we didn't have a lot of money to go around. But I Received a $5k gift a couple of years back and was able to max out our ROTHs that year. I was very intent on building up our cash, but I felt comfortable with this because I knew I could access the ROTH in extreme emergency. So I actually currently have about $7k cash in my ROTH which is designated for emergency. The thing is, for me, maxing out the ROTHs right now is like putting away 23% of my gross income to retirement. Far more than we NEED to put away. But I will do it if I can access the cash in extreme emergency. I don't recommend this strategy if your retirement savings contribution is only 1% - 15% of your income, say. Or if your idea of an emergency is a car repair or a vet bill. Wink I think hell will freeze over before I actually tap my ROTH for cash, honestly. My idea of emergency is prolonged job loss or loss of home (i.e. natural disaster).

Ideally, we will probably keep $10k cash in our ROTH, of our $15k total Efund. Keep $5k accessible cash for mini-efund. So, we may max out our ROTHs this year, with that philosophy.

The ROTH cash is in that CD I mentioned, and in MMFFs. I'll be able to invest a portion of the CD though. We have more cash than I prefer in our ROTHs, simply because my prediction on the recession. (It isn't much - nothing that will make us rich. Like $10k? Wink )

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That's the long and the short of it.

The short answer is that all our money is in Money Market accounts, earning as much interest as possible. When we reach our $30k goal we will probably start shopping CDs and developing more of a long-term cash savings plan. Will probably be $10k in ROTH, $1k in Credit Union, $19k in Online Savings. Anything above that can be tied up in CDs. We will start formulating a long-term plan when we get there. I am a "one thing at a time" type gal.

Investing cash well is not an area I have a lot of experience in though. I have some learning to do. Wink

5 Responses to “Where Do I Keep my Cash?”

  1. M E 2 Says:



    I highly suggest SOME cash (the amount is up to you) be kept at home.

    Money readily accessible in a bank is great IF/WHEN the bank is open.

    In August 2003, quite a goodly portion of the eastern part of the US suffered a blackout. Some were without power for days. No power = no access to the ATM.

    Therefore cash in the bank be it $100 or $1,000,000 is rendered useless.


  2. No Pain | No Gain Says:

    Thanks Mama... Great info. I am afraid that I am still in the "need to hide it" stages... although with more money left over at the end of the month, I am slowly coming out of it. Before I would fund my savings, then turn around and take it out to pay a bill (before our brilliant budgeting system). I really enjoy your blog... keep on writing! Big Grin

  3. whitestripe Says:

    I fail miserably at ME2's suggestion, i hardly ever have cash at home, unless you count a couple of coin jars. however i like to think that we can survive up to a week or more on what we have at home, so i don't really know what we'd need money for. lots of businesses also have manual credit card machines, the type where you 'swipe' and copy all the details with carbon, for situations such as a blackout.

    we keep all our money in one account too, it's in our main account though. it is our offset account for our mortgage.

  4. monkeymama Says:

    I keep cash on hand - I agree ME2. I just don't think it's very appropriate to advertise how much cash I have stuffed under my mattress. Wink

    & truthfully - it isn't much. We don't carry cash and we have been trying to keep $20 in our wallets, a little at home, and we try to add to the home stash every year. (I think I would be lucky to have $5 cash with me at the moment - something to work on).

  5. terri77 Says:

    I'm always cash strapped. Finding me with a good amount of cash on me is a rarity.

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