With the advent of digital payment apps, cash may seem less useful to have on hand. Zenith Wealth Partners Chief Financial Planning Officer Chelsea Ransom-Cooper joins Wealth! to give insight into how much cash consumers should keep in their wallets.

Ransom-Cooper offers the following advice to consumers: “We want to think about how much we have in our checking account. So the cash in our checking account is really a vehicle where we only want to have 1 to 2 months of expenses there so we can cover our bills, any of our necessities. But it’s just a transition place. When we think about that high-yield savings account, that’s where we want to have our emergency savings. “

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This post was written by Nicholas Jacobino

Video Transcript

Well, we are living more and more in a paperless world apps.Now provide digital tipping options.You can send your friends and family money with the click of a button through Venmo and cash app and others.But if the same cash is King is still true, how much should you be carrying on you at all times to help us with some of the tips here we bring in Chelsea Ransom, Cooper Zenith Wealth.Great to have you here with us first and foremost.Uh you are Zenith Wealth Partners, Chief Financial Planning Officer.I would like to get your full title in there, first and foremost, and Chelsea, how much should people be keeping on them?This is a fantastic question and it’s evolved over time.Typically when I have this conversation with clients, I notice that they only hold about 20 to $30 in cash.But over time, it’s also um come down quite a bit as well because cash is becoming the anomaly when it comes to how we’re buying things.If you notice a lot of people or retailers offer those little square cards where you can scan your card or your apple pay, it’s a lot simpler to make purchases and you don’t necessarily need cash as much as in the past outside of just simple tipping.And so with that in mind, I mean, there’s how much you’re carrying around in cash and then there’s also how much you are actually keeping in cash in the bank versus keeping in perhaps a high yield savings account or keeping in even, I don’t know, uh a trading account.How should people be divvying that up?That’s really important to consider as well because we wanna make sure cash is king, right?So we want to think about how much we have in our checking account.So the cash in our checking account is really a vehicle where we only wanna have, you know, 1 to 2 months of expenses there.So we can cover our bills, any of our necessities.But it’s just a transition place when we think about that high yield savings account, that’s where we want to have our emergency savings.And we love a high yield savings account because of the interest that’s able to accrue by leaving our money in a safe secure place.It’s also important that that money is at least keeping up with inflation because inflation can really erode and eat into the value of our money if we’re not necessarily being strategic about it when we’re talking about investing or how much cash that we want to put towards that, that’s where we want to consider um what are some of our long term goals?Understanding that the stock market is pretty volatile but that we still need some long term growth to be able to achieve our financial goals.What we’re talking about at the end of the day here is, is boiled down to one thing and that is also liquidity.How much of people’s wealth is there a good rule of thumb?How much of people’s wealth should be liquid?Typically, when we’re thinking about how much is liquid, I would say anywhere from 2 to 10% of somebody’s overall wealth is how much should stay liquid.You know, there’s always a saying, stay ready.So you don’t have to get ready.And that’s really important if you’re thinking about how you’re utilizing cash and your overall investment strategy or your overall portfolio, certainly here.And then when you’re talking to clients right now, how are they monitoring, you know, their own spending habits with also combating on a personal and household economics front inflation as well with regard to their own cash on hand that they’re keeping and, and kind of moving the dial on on how much of that seems right for them when it comes to how much cash that really makes sense on what they should hold on to.Um A lot of individuals are really thinking about how they can organize their accounts in a strategic fashion.So that’s why we’re talking about you know how much is in that household checking account for any bills.But that first checking account really needs to be for any needs that you have.So I encourage clients to really focus on that 50 30 20 rule when it comes to their overall budget and spending and try to focus on having 50% for any of those, those needs in a checking account, 30% for any of those ones in a second checking account.So you have a bit more control of where your money is going and making sure you’re not overspending.Yeah.No, that’s a good piece of advice here.And then additionally, just lastly while we have you here, Chelsea, I mean, the thing that’s never fun to talk about but you, it’s less fun to be unprepared for an emergency fund here.I mean, how are you advising clients to set up their emergency funds?One thing for an emergency fund is you want to make sure that it’s inconvenient.A lot of the time when we open an emergency fund, we tend to open it in the same place that our checking account is and sometimes we’ll linger and dip into that um, on things that may not be emergencies.So if you make sure that your emergency savings or that emergency fund is in a bank than you’re checking, it’s a little bit inconvenient right now.It may take 2 to 3 days to get that transfer and then you really reconsider.Hey, is this money that I really do need right now, or can I let it sit in that high yield savings account or it’s getting four, or maybe even closer to 5% on annual interest, um, through that vehicle?I mean, look, the sneakers are gonna sell out on, uh, on the Sneakers app.I mean, of course, it’s an emergency here.Chelsea, all things.Uh, I’m just kidding there.Of course, everyone don’t put that.That’s an emergency.Precisely.Chelsea Ransom Cooper.Who’s the zenith?Well, Chief Financial Planning Officer, thanks so much for taking the time.Chelsea.Thank you for having me.