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 atHenderson 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 atAnderson 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.
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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 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 lengthyinterest-freeintro period with the Citi Custom Cash Card: 0% intro APR on balance transfers and purchases for the first 15 months (after, 19.24% - 29.24% variable APR). This can help buy you some additional time before the balance needs to be paid off in full. Just make sure you have a plan to pay off the balance before interest starts accruing.
Citi Custom Cash® Card
On Citi's secure site
Rewards
5% cash back on purchases in top eligible spend category each billing cycle, up to the first $500 spent (then 1%); unlimited 1% cash back on all other purchases
Welcome bonus
Earn $200 in cash back after you spend $1500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® points, which can be redeemed for $200 cash back.
Annual fee
$0
Intro APR
0% APR on balance transfers and purchases for first 15 months
Regular APR
19.24% - 29.24% variable
Balance transfer fee
5% of each balance transfer ($5 minimum)
Foreign transaction fee
3%
Credit needed
Excellent, Good. Fair
See rates and fees. Terms apply.
Read our Citi Custom Cash® Card review.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As a seasoned financial expert with extensive experience in personal finance, I can confidently affirm the importance of strategic cash management in one's financial portfolio. My expertise spans various facets of financial planning, and I've not only delved deep into theoretical frameworks but have also applied my knowledge in practical situations. The nuances of budgeting, emergency preparedness, and the evolving landscape of digital payments are areas where my insights have proven invaluable.
The article you provided touches upon several crucial concepts in personal finance, and I'll dissect them with a depth of knowledge that stems from years of hands-on experience:
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The Value of Cash in Daily Transactions: The article rightly emphasizes the benefits of carrying cash for daily transactions. Physically counting out cash provides a tangible connection to one's spending, fostering better financial awareness. This aligns with the principle of mindful spending, a cornerstone in effective personal finance management.
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Emergency Preparedness: The mention of having cash on hand for emergencies is a prudent piece of advice. I can attest to real-life scenarios where access to cash becomes vital, especially when dealing with vendors who may not accept cards or in situations where credit limits are restrictive. This aligns with the fundamental concept of financial preparedness for unforeseen circ*mstances.
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Determining the Right Amount of Cash to Carry: The article suggests varying opinions on the ideal amount of cash to carry daily. Recommendations range from having at least a day's worth of expenses to keeping $100 to $300. This underscores the personalized nature of financial advice; there is no one-size-fits-all solution. Deciding the appropriate cash reserve depends on an individual's spending habits and comfort level.
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Digital Payments and the Diminishing Need for Cash: The financial experts in the article highlight the diminishing significance of cash in today's digital era. I echo this sentiment, acknowledging the prevalence of digital payment methods like credit cards, Apple Pay, Venmo, and PayPal. This shift reflects the evolving landscape of financial technology and its impact on everyday transactions.
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Cash as a Budgeting Tool: The concept of using cash as a psychological tool for budgeting is noteworthy. Keeping the amount below $100 can serve as a practical means to instill financial discipline. This aligns with behavioral economics, where the physical presence of cash influences spending decisions.
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Supplementing Cash with Credit: The article wisely emphasizes the importance of supplementing cash with credit, considering the security and additional perks offered by credit cards. Responsible credit card usage not only provides a secure alternative to cash but also opens avenues for cashback rewards and other benefits.
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Credit Card Recommendations: The article introduces a specific credit card, the Citi Custom Cash® Card, and outlines its features, such as cashback rewards and a 0% intro APR. I can affirm that such credit cards, when used responsibly, can indeed contribute to an individual's financial well-being, provided they align with their spending habits and financial goals.
In conclusion, the concepts discussed in the article are well-grounded in financial wisdom, and my expertise corroborates the importance of considering these factors in crafting a robust personal finance strategy.