I’ve always been a saver. When I was younger and got money for an allowance or on my birthday, it would immediately go into my coffee can (less fragile than a piggy bank). And then it would just stay there.
When I started my first full-time job out of college, the saving started up again. I automated my savings, having money transferred into my high yield savings account every month. I also had money going into retirement accounts, but I also built up my emergency fund.
As time went by, I continued to save. I increased my 401k contributions, maxed out my Roth IRA contributions, and started thinking more that my savings was a “down payment fund” rather than “emergency fund”.
Well, we finally bought the house, which took a big bite out of our savings accounts. Since we only merged a few accounts after getting married, we both had our separate savings accounts. We each transferred half of the down payment amount to our joint checking account so we could withdraw the total amount we needed for our down payment as a cashier’s check.
Luckily, we’d been saving for so long that we still had a good amount in savings left over. We earmarked some of the money for specific planned maintenance/upgrades (for example, we knew we were going to have to replace our heat and hot water systems soon, even before the leak, because they were both pretty much at the end of their useful life). And then re-named some savings back into an emergency fund.
So. Now what? The title says I’m a cash hoarder. I suppose when I was little, it was literal cash I was saving. Now it’s “cash savings”, as in money kept in a “high yield” savings account rather than invested.
Is this a problem? It depends on who you ask, and also what this money is actually meant for, and what your timeline looks like.
It’s standard advice that you should keep an emergency fund or anything else you might need in the short term in something reliable, like an FDIC insured savings account, CD, money market, etc. You don’t get very high returns, but your balance isn’t going to drop. And your gains may not outpace inflation, so over time, your money loses value (the balance increases, but costs of anything you might buy with that money in the future go up). The most I’ve ever done to try to increase my earnings in this is transferring money into new bank accounts promising higher yields.
According to a lot of personal finance folks, any money you don’t plan on touching any time soon should be invested (preferably in the stock market, specifically in low cost index funds), since you have the potential for much higher gains. Of course, with higher potential rewards, there’s a higher risk; you may lose money if your investments drop in value. If you have to sell before the market goes back up, you lock in those losses.
The other issue for me? Trying to understand why I want to keep so much in savings rather than invested. For me, it’s that fear of losing money. Yes, as noted above, technically I’m losing value for my money due to inflation. But in my brain, I don’t feel secure if we have less than a certain amount in savings. I guess this makes it an emergency fund, since I would want this money in an emergency. But I just did a quick calculation, and that “magic number” in my head would probably cover 10 months of our current living expenses if we both had zero income coming in. This seems like…a lot. Too much? Probably. Why am I this worried? I mean, I also know some of this money will also go to big and little purchases down the line. I’m not super afraid to spend it, as long as we keep that buffer, and are spending the money on things we want/need. What’s the point in saving all this money, if not to spend it once in awhile?
What about you? Are you a “cash hoarder” like me? Do you think I’m foolish to be missing out on potential gains because a steady guaranteed return gives me peace of mind? How can I get over that fear and make a better choice with my money? How much would you keep in your emergency fund?