One of my favorite books growing up was goldilocks and the three bears. I still have a goldilocks book that my mom held on to and gave back to me when I have kids. It sits on the bookshelf in my daughter’s room, and it even still has remnants of an egg salad sandwich (another childhood favorite of mine), circa 1990. 

If you recall from the goldilocks story, everything she tried after she burgled the poor bears’ home was either too big, too small, too hot, too cold. Except for baby bear’s things, which were just right. 

The same is true for your cash and emergency savings. I often see people with either way too much cash earning pennies of interest in the bank, or way too little in cash, and they’re among the 40% of Americans who cannot cover a $400 emergency without putting it on a high interest rate credit card. 

This week on the podcast, we’re doing an annual financial physical. Today, I’m talking about reviewing your cash and emergency savings. And frankly, I wish I had some more groundbreaking advice here. I don’t. The classic advise you hear from almost all personal finance experts is the same for a reason. It’s because it’s really good advice. 

Hold 3-6 months worth of your income in cash to guard against financial emergencies, and earmark any additional cash you might need to any known upcoming purchases - maybe a daughter’s wedding, or if you’re me, that sweet Honda Odyssey that I needed to buy last summer when baby #3 was on the way. I’m officially very uncool driving around in my minivan, but I really do love it. And when it’s just me and the baby, it’s time for a little Dr. Dre, so I can still live in the delusion that I might still be cool, while driving to pick up my other 2 kids from school. 

I sympathize with violaters of this rule. I like the security of holding cash, so I usually have too much on hand. So you know, do as I say, not as I do with this one. However, I like paying cash for everything, so I tend to hold more to give me the flexibility to do that. 

But holding too much cash is causing you (and me) to lose money. Even with inflation still low, that cash you have sitting in the bank is not earning enough to keep up with inflation and you’re losing money in real terms. 

So make sure you’re not hoarding cash, which is a common temptation I see among people who are closer to retirement and have a good income stream and assets. 

That’s it for today, Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip.

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance