How much cash should your household keep?

Cash can seem unproductive when investment markets are rising. It looks very different when a furnace fails, a job ends, or a family member needs care. The purpose of a reserve is not to win a return contest. It is to keep an unexpected event from forcing an expensive decision.

Start with the cost of keeping the household running for one month. Include essential housing costs, food, utilities, insurance, transportation, medical necessities, and minimum debt payments. Add annual but unavoidable items as a monthly share. That is your core cost. Divide accessible emergency cash by that amount to express your reserve as months of runway.