Cash on Hand

Interactive Video

[A circular graph that is divided into sections: 401k (11%), pension (4%), stocks (26%), bonds (34%), real estate (19%), and cash (6%).]

Narrator: An investment portfolio includes everything of value that you own. This can include a retirement account such as a 401(k) or pension, stocks, bonds, real estate, and, yes, cash. Money in a savings or checking account is considered part of the whole financial picture.

[Question on screen: “What percentage of your portfolio do you think experts recommend that you keep liquid as cash? Enter a number.”]

What percentage of your portfolio do you think experts recommend you keep liquid as cash? 

[A pie chart representing 2%-10% with the text below, “cash and cash equivalents.”]

According to the U.S. Bank, a general rule of thumb is that cash and cash equivalents make up between 2 percent and 10 percent of your portfolio.

[Picture of a woman thinking with a thought bubble that contains a pile of cash and a question mark.]

Most people don’t think of cash as part of an investment strategy. Why do you think having cash is important?

[A faucet dripping a few coins into an empty hand.]

At the most basic level, not all investments are liquid, or immediately accessible. Some are tax-sheltered for education or retirement and can’t be withdrawn for other reasons without penalties. [An umbrella appears with a few coins under it with “education” on one side and “retirement” on the other. A couple of coins are brought out from under the umbrella and a caution sign appears over them.] Stocks take time to liquidate into cash. [Monetary stocks appear and a few coins fall from them. Two of the stocks disappear.]

[Picture of a laptop with a shattered screen.]

So it’s important to have cash available to deal with things when life happens. [It’s important to have cash available to deal with things when life happens,” appears.]

[Picture of an online banking account that shows the latest transactions in the checking account, $2,043.33 in an Emergency Fund Savings Account, and $3,187.06 in a New Car Savings Account.]

Of course, you have money for daily living. But this is about cash beyond paying your bills. [Highlight appears around the checking account in transaction portion of the screen.] You need to keep a certain amount of money in bank accounts for unexpected situations. You got it: an emergency fund! [Highlight moves to the emergency fund savings account portion of the screen.]

[Picture of 12 calendars with 6 of them highlighted.]

Financial advisors recommend having enough cash in a bank account to cover 3 to 6 months of expenses. [“3 – 6 months of expenses” appears.]

[Picture of a hand holding cash and a debit card.]

Keeping some cash on hand can also help you get through tougher market times. [A decreasing bar chart with a downward facing arrow appears. A bomb with a dollar sign in it is near the chart.] Some people rely on dividends, or the returns they get from their investments, to live on. [A pie chart appears with 25% of it being labeled, dividend. The rest is labeled with a dollar sign.]

[Picture of a woman looking at her debit card while on the computer with an icon representing the tough market.]

When the market isn't doing great, it's crucial to have some investment money easily accessible to support your day-to-day needs. [Thought bubble appears with a pile of cash and a check mark.]