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Do you have too much cash?
By Fairport Wealth
When It’s Time to Move Some Money
Our lives changed dramatically in 2020, including how we spend. Pre-pandemic, many people hopped on trains, planes and cruises to enjoy a holiday, hosted weddings and other joyous celebrations, and regularly visited the spa or salon. However, social distancing and other pandemic-related guidelines have resulted in a decline in spending, especially in the travel and service sectors.
If you’re spending less than usual, you may have more cash in the bank than you need, and it may be time to move some money.
First, make sure you have enough reserved for a rainy day
The pandemic reminded us that we cannot predict the future — but an emergency fund (to cover essential expenses including housing and utilities, heath care, living expenses and any debt you hold) can help us prepare. The general rule of thumb is to set aside a three- to six-month cash reserve. However, your circumstances may mean you need more. For example, if you’re the sole family breadwinner, work in an unstable industry, hold a senior executive position or are a business owner, a nine- to 12-month reserve of accessible funds may be safer. Keep this money in a separate account earmarked for emergencies to avoid inadvertently spending it.
Then, invest for your future
With bank interest rates at historic lows, the money you keep in the bank is likely earning next to nothing. According to the FDIC, the average annual percentage yield for a jumbo savings account (for deposits greater than $100,000) is 0.05%. 2 Investing money above and beyond what you need for everyday expenses and emergencies can help you achieve your long-term goals.
Make a resolution to review your finances with your Luma Wealth advisor, who can help you reevaluate your liquidity needs and invest in your dreams.
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1 COVID-19 will weigh on consumer spending till vaccinations change the game, Economics Spotlight, December, 2020, Deloitte Insights, December 18, 2020, https://www2.deloitte.com/us/en/insights/economy/spotlight/economics-insights-analysis.html
2 Weekly National Rates and Rate Caps – Weekly Update (Weekly rate cap information for the week of December 21, 2020), FDIC https://www.fdic.gov/regulations/resources/rates/historical/2020-12-21.html
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