How much Cash should you keep in your Wallet

The answer to this question today is probably very different than it would have been twenty or thirty years ago.

These days I can pay for most items using plastic; namely via debit and credit cards. Indeed, my bank (Royal Bank of Scotland) has just announced that it has launched a contactless card that enables you to pay for items under 10 in select shops by just touching the card against the shop’s card reader device. There isn’t even a need for me to enter my PIN.

Because it’s become so easy to pay by card (and because carrying lots of cash is cumbersome), I find that increasingly I carry very little cash in my wallet. I haven’t totally dispensed with cash, however, and there are two reasons for this. Firstly, there are still some purchases that only accept cash or only allow card purchases for amounts over a certain threshold. For example, if I want to purchase a bus fare, I have to use cash and indeed I need exact change. I therefore like to keep some loose change to cover these kind of small purchases. The other reason that I still carry some cash is as a safeguard in case I find myself not being able to pay by card. For example, it’s not unknown for cards to malfunction or be swallowed by defective cash machines. You might also lose your card. In any of these circumstances, I’d like to have enough cash to pay for a taxi or bus fare home, rather than having to walk or beg!

I find that I generally keep about 20 – 30 in my wallet (i.e. about $40 – $60). However, I do tend to up this a little if I go on holiday. This reflects the fact that we are usually less certain of our surroundings when we are on holiday, and therefore it’s worth having a bit extra cash available to help deal with any sudden emergency.

Another situation when I have more cash in my wallet is when I go on holiday abroad. This is partially driven by practical needs; i.e. you are never entirely sure how easy it will be to pay by card, and then there is also the fact that withdrawing funds from a cash machine whilst abroad attracts charges.

Ultimately, the amount of cash that you should keep in your wallet or purse will depend on what you feel comfortable with. However, it’s worth remembering that there are two very strong arguments for not keeping too much cash on your person. The first is the risk of being mugged (or of just losing your wallet). Indeed, if someone observes you withdrawing hundreds of pounds or dollars you may be increasing your risk of being mugged. The second reason for limiting the amount of cash you carry is that you don’t get interest on it. If you left it in a savings account you could be earning 4 or 5% interest.