How much cash do you usually have on hand? We’re not talking about just the amount in your wallet – it’s important to keep some cash in reserve to cover your everyday spending needs as well as the inevitable “rainy day.” Or maybe you’ve been setting aside some money to pay for your summertime fun.
But having too much of your savings sitting in cash can be an issue, especially when you consider a long-term goal such as retirement. The recent rise in interest rates, particularly short-term rates, may provide an opportunity for your excess cash – so knowing how much cash is appropriate is important.
To help you determine this, we like to use the acronym USES:
By viewing your cash based on its USES, you can:
When the market declines or becomes more volatile, like we saw earlier this year, some investors may be tempted to move to cash, thinking they can avoid the risks associated with a market downturn. But Edward Jones believes there are risks to not investing. In fact, the biggest risk you could face is the possibility of not reaching your long-term goals.
So while you’ll want to ensure you have enough cash to cover each of your USES areas, you’ll also want to focus on the growth necessary to help achieve those goals, and as we noted earlier, there may be opportunities, particularly with the rise in short-term interest rates, to invest some of this excess cash.
We recommend you partner with your financial advisor for a review of your entire financial picture. Once you’ve ensured your USES areas are covered, you can better focus on your longer-term goals, including preparing for retirement.
This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.
Investors should understand the risks involved in owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates, and investors can lose some or all of their principal.