We all know it’s important to save and invest. But let’s get down to details: how much are you supposed to keep in cash?

If you leave too much in cash, you face inflation rate risk. If you invest it all, you may have nothing on hand for emergencies. Here’s how to find the balance:

Why not keep everything in cash?

The main reason not to store all your wealth in cash is inflation. In most developed countries like Singapore, the government will target an inflation rate of three per cent per annum. The exact reason would take several pages to explain, so we’ll summarise by saying three per cent is a healthy amount, which is typical of a growing economy.

This means that the prices of things rise by about three per cent per year. This is why in the 1980s, it was possible to have chicken rice for …