Studies show that holding cash as a liquid asset can contribute to your overall life satisfaction.
According to a recent study, liquid assets are an important part of personal security, satisfaction, and happiness.
Cash and the Hierarchy of Needs
When we start out as adults, cash in the bank is our first measure of security? Over time, as we start working through our hierarchy of needs—food, shelter, etc., cash in the bank is no longer our primary measure of success; instead, we move on to making wise investments and planning how to maintain a satisfying lifestyle in ten, twenty, or thirty years.
The Happy Facts about Cash
However, according to the NCBI study, we should not discount the benefit of holding cash. The study points out people who have enough liquid wealth tend to think more positively about their own financial health. Their findings suggest these positive perceptions about financial wellbeing translate into a greater satisfaction with life in general.
Finding the Right Balance?
Holding too much cash increases our exposure to inflation or purchasing power risk, not holding enough cash can cause anxiety, so finding the right balance is key. There is not a one-size-fits-all approach to cash management. Typically, we recommend a minimum of two months and a maximum of 6 months of cash in a local bank to maintain your existing lifestyle, but we have some clients for whom the right amount is much more than that. Your unique objectives and circumstances will help determine the right balance for you.
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