How much cash should you keep at home?

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Physical cash is becoming less relevant as money management goes digital, but there’s still a need to have a reasonable amount of cash at home in case of emergencies.

Here’s more information about how much cash you should keep at home, the risks involved and how to keep your money safe.

Why people keep cash at home

Despite the ease of depositing money in a bank account and the assurance of FDIC protection, many people still keep a portion of their funds in physical cash. For some, it’s less about keeping cash and more about avoiding to deal with banks. A recent survey from the FDIC found that 36 percent of unbanked individuals – those who don’t have bank accounts – don’t trust banks. Privacy concerns are also a major concern, which is understandable in a business environment threatened regularly by data breaches.

Others, however, may implicitly trust their banks but not the world around them. What if a hacker penetrates the payment system? What if a hurricane damages the electric grid? Having some cash at home can provide peace of mind if the unthinkable happens; you’ll still have cash to buy essential goods even when you don’t have access to your credit cards or debit cards.

How much cash should you keep at home?

Elliot Pepper, CPA, CFP, MST, financial planner and co-founder of Maryland-based Northbrook Financial, says that “a small but reasonable amount of cash should be kept on hand at all times.”

“The need for actual cash is growing less and less relevant, so an actual savings of physical cash is primarily there to provide protection in an extremely adverse scenario,” Pepper says, adding that the scenario would likely not be a “long-term position.”

“A cash amount enough to cover the absolute bare necessities for two months might be a reasonable basis,” Pepper says. “This monthly amount would be less than the monthly amounts used to calculate a traditional emergency fund, as it’s really there to cover the bare necessities in the face of an emergency.”

Those bare necessities include a minimum housing payment, food staples, batteries, water, gasoline and basic living needs. However, Pepper says that it might be more wise to keep those staples on hand instead of keeping cash to buy them. So, for example, rather than keeping $50 at home to fill up your gas tank, perhaps keep a reserve of gas or make sure your tank is always full.

“There is a difference between being a ‘doomsday over-preparer’ and a reasonably responsible planner,” Pepper says.

Where to safely keep cash at home

Just like any other piece of paper, cash can get lost, wet or burned. Consider buying a fireproof and waterproof safe for your home. It’s also useful for storing other valuables in your home such as jewelry and important personal documents.

The risks of keeping cash at home

Planning to stash cash in your home? Consider the drawbacks:

You don’t have FDIC insurance: When you deposit money in an FDIC-insured bank, you can take comfort knowing that your deposits will be protected and reimbursed up to $250,000 if the bank fails. For credit unions, insurance is provided by the National Credit Union Administration. If, however, someone steals your cash or you lose it, it’s gone.

Some places won’t accept it: As the coronavirus pandemic forced us to reconsider what we touch, many merchants have shifted to cashless and contactless transactions. They want credit cards, debit cards and mobile payments to eliminate the spread of germs on greenbacks.

No earning potential: One of the major benefits of keeping cash in a bank account is that it can grow, thanks to interest earned on bank balances. If you keep your money in cash, it never grows. Your $20 is still $20 a year later, and that same $20 is actually less valuable due to inflation. The more money you keep in cash, the more you miss out on accruing interest.

Alternatives to keeping cash at home

Pepper says that the argument for keeping a lot of cash on hand is less compelling in 2021 as digital payment technology continues to make dealing with money easier.

“From a safety perspective and administrative ease standpoint, it is so easy to transact everyday purchases electronically. Additionally, keeping savings in an FDIC-insured account provides a degree of protection that is lost when cash is just kept under the mattress,” Pepper says.

Rather than stockpile cash at home, you have a few options:

Open another checking account or high-yield savings account: If you already have a bank account, consider opening another account at a different bank or credit union to diversify where you keep your money. Let’s say, for example, that your primary bank is impacted by a power outage and its ATMs are offline. Your other financial institution may not be affected. If so, verify that your new account doesn’t have a minimum balance requirement to avoid any fees for keeping a small amount of cash.

Deposit funds in a prepaid card: Rather than keeping cash in physical bills, you can load a small amount on a prepaid debit card to make sure you have cash available in an emergency. Federal law does provide protection for those funds if you have registered your prepaid card, and someone steals the number. However, you have to report the issue immediately. Additionally, some prepaid cards may charge you a fee to replace a lost or stolen card.

Keep some cash in a PayPal account: While PayPal shouldn’t be a substitution for your primary bank account, you can keep some money in it. The platform offers convenient payment features and the ability to send money to friends.

Written by
David McMillin
Contributing writer
David McMillin writes about credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
Edited by
Senior editorial director
Reviewed by
Professor of finance, Creighton University