How Much Cash Is Under Your Mattress?



I read an article recently that stated, “69% of Americans have less than $1000 in their savings accounts.” What a scary figure that is. That basically means that roughly 70% of the people in this country are living pay check to pay check. What’s even more frustrating is that the same people are probably driving around in new cars, wearing fancy shoes, and grabbing a cup of fancy coffee every day as well. It’s enough to drive me crazy!

Ok, I digress.. The article got me thinking though. What is the “right” amount of money to keep laying around in savings accounts?

One thing that I can’t stand is idle cash. I like to have as much of our hard earned money as possible working in the stock market. That said, bills still need to be paid, and unexpected expenses tend to pop up, so there is a need to have some cash twiddling its thumbs in a regular bank account. The question is, how much?

Obviously the answer to this question is going to be different for everyone. What I’d really like to gauge from this post is the amount that you (the readers) need to have on hand to be comfortable.

I also think that the amount should be different for working years versus retired years, so I will break that down as well.

How much does the MBC family keep liquid?

We like to keep enough to cover our fixed monthly expenses, which is about $3,200. Then I like to have another $2,000 for vacations, unplanned expenses, and whatever randomness rears its ugly head. So for the MBC family I would say a good round number of $5,000 is what we keep liquid from month to month.

What about emergencies?

In the case of an emergency, where we needed a large amount of money, we would simply use our credit cards. This would buy us time between the time we charge the card and the time the bill is due, to pull the necessary funds from our taxable Vanguard account in order to pay off the credit card bill. Note, we have been living by this philosophy for over 2 years now, and I have not had to implement this yet. My guess is that I wont have to.

What about in retirement?

The above numbers show how we handle cash during our working years. However, I anticipate this strategy to change once we reach financial independence. During our FIRE years we will have a cash stash as part of our safety margins. Being over conservative when it comes to money, our plan is to have 3-4 years worth of living expenses in cash. The reason being is that most recessions last between 2-4 years, so this money would be used if/when the next one comes along so we aren’t touching our investments in a down market. Of course, we may also be working part time, so there may be no need to touch the cash stash, but it will still be nice to have. Assuming we spend around $25,000/year in retirement, we need to have somewhere between $75,000-$100,000 in cash. I would be comfortable with as little as $50,000 because I know we can cut costs if needed and I am certain that we will in some shape or form be earning an income.

So that’s it.. We keep about $5,000 laying around during our working years and plan to keep about 3-4 years worth of living expenses or $75,000 – $100,000 during our retired years.

So readers, how much is in your bank account? Will that amount change when you retire?

4 thoughts on “How Much Cash Is Under Your Mattress?

  1. I have probably more cash than I need but it’s nice to have a rainy day fund in case something goes wrong. So while it probably doesn’t make sense for us to hold so much cash it helps us sleep at night and we’re willing to forgo some of the returns 🙂

    1. I get that MSM. I still prefer to use our CC’s as the source of our rainy day funds and then if need be I can just pay myself back with funds from our taxable investment accounts. That said, piece of mind is very important, and you have to do what works for you. Thanks for the comment.

  2. I have between 2 and 3 months of expenses in savings. I probably could get by with less without a problem. My wife and I both work and are in different industries and unlikely to lose our jobs at the same time. On the other hand, the growth on a few thousand dollars in the market is not going to make a big difference in the grand scheme of FIRE anyway.

    1. Hi Matt, I think 2-3 months savings is very reasonable. Good point about you and your wife being in different industries. I hadn’t taken that in to consideration, but my wife and I are in the same boat. Thanks for stopping by.

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