{"id":4800,"date":"2014-10-03T05:45:01","date_gmt":"2014-10-03T12:45:01","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=4800"},"modified":"2014-10-03T05:55:33","modified_gmt":"2014-10-03T12:55:33","slug":"cash-hold-it-invest-it","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/cash-hold-it-invest-it\/","title":{"rendered":"Cash – Hold It and Invest It"},"content":{"rendered":"

\"cash\"<\/a><\/p>\n

 <\/p>\n

In January 2012, I wrote about our \u201clove\/hate\u201d relationship with cash.\u00a0 Almost three years later, we believe a quick refresher is in order.\u00a0 Starting in 2013, the FDIC insurance<\/a> on bank accounts reverted to a limit of $250,000 per depositor at each insured institution.\u00a0 If you have higher amounts in your name at any particular bank (even if it is spread over different accounts), it is not covered by the FDIC at this time.\u00a0 We recommend using multiple banks, if necessary, to stay within the FDIC limits.<\/p>\n

With our client accounts we use a money market fund that maintains FDIC insurance even if the balance is more than $250,000.\u00a0 Within the fund, deposits are split between different banks for each fund holder to stay under the $250,000 limit per institution.\u00a0 As long as interest rates stay similar between insured and non-insured money market funds, we will continue to use this type of fund.<\/p>\n

As we approach 2015, low rates are still a strong incentive to \u201cdo something\u201d with our cash.\u00a0 While inflation is showing signs of life<\/a>, we are reminded that losing our purchasing power is the real cost of holding cash.\u00a0 With this being the case, why hold much of it at all?\u00a0 Our need for cash savings is basically two-fold: emergences and opportunities.\u00a0 Money emergencies happen.\u00a0 Having liquid savings helps avoid running up debt or selling investments in crisis situations.\u00a0 As for opportunities, we can be selective in the timing of major purchases and buying investments.<\/p>\n

Finding the right amount of cash is important financially and emotionally.\u00a0 Holding a large amount will give us emotional comfort but end up costing us financially in the long run.\u00a0 Having minimal savings may maximize investment returns but add stress to dealing with unexpected cash flow needs.\u00a0 The \u201csweet spot\u201d should allow us to sleep well at night without jeopardizing our long-term financial goals.<\/p>\n

A simple discipline I recommend is to set a target amount for savings.\u00a0 As your cash levels move above that amount, transfer the extra into your investment accounts for new purchases.\u00a0 If you see a pattern develop, you may want to automate this process.\u00a0 For example, set up a monthly transfer of $500 to keep savings at the desired level.\u00a0 If your savings are shrinking below your target amount, you may need to reverse the process until your situation stabilizes.<\/p>\n

To learn more about David S. Hunter, view his Paladin Registry profile<\/a>. \u00a0<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

  In January 2012, I wrote about our \u201clove\/hate\u201d relationship with cash.\u00a0 Almost three years later, we believe a quick refresher is in order.\u00a0 Starting in 2013, the FDIC insurance on bank accounts reverted to a limit of $250,000 per depositor at each insured institution.\u00a0 If you have higher amounts in your name at any particular bank (even if it is spread over different accounts), it is not covered by<\/p>\n","protected":false},"author":49,"featured_media":4804,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[395],"tags":[],"class_list":["post-4800","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"\nCash - Hold It and Invest It<\/title>\n<meta name=\"description\" content=\"Finding the right amount of cash is important financially. 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