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Cash is King? Why saving some cash may be helpful in the long-run.

    

SUMMARY: Learn how keeping a cash reserve can help you in both the long and short-term.

Paying with credit cards and using electronic payment systems has made our lives easier, and transactions can occur much faster with the help of this technology. While these methods of payment may be great options for many, recent studies show that having a small amount of cash saved can prevent lower-income families from defaulting on loan payments, rent or having to decline important medical care. This advice shouldn’t just apply to those in low-income households. 

Having a cash reserve is highly beneficial for emergencies, especially in situations where electronic transactions may not be possible.

For example, during Hurricane Harvey, many gas stations were not able to process electronic payments, therefore if you didn’t have cash on hand, you couldn’t fill your tank! Even a small amount of cash, around $1,000.00 in savings could be extremely helpful. An article from the St. Louis Fed states that even if someone has high interest debt, this small amount of savings could help reduce delinquency on bills, medial care or providing food.

The same article states that liquid assets are very predictive and even an increase of $100 in cash savings, could cash-320.pngprovide a 4.6% reduction in the probability of a household to be delinquent in paying rent or mortgage payments.

Whether or not you are living in a lower-income situation, having some cash put away can never be a bad idea. Always be sure to store it in a secure place, away from potential water/fire damage or in a high-traffic area where someone could access it easily. As always, TDECU is here to help you with any financial issues. For more information on opening a savings account, please visit TDECU.org/share-savings-accounts.

Source:

https://www.stlouisfed.org/on-the-economy/2017/december/when-holding-cash-beats-paying-debt

 

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