What is the downside of holding too much cash?

What are the disadvantages of holding cash?

Cash? Oh, you mean that stuff accumulating dust bunnies in my sock drawer since like, oh, last Tuesday? Yeah, about that…

Holding onto too much cash, well, it’s a bit like hoarding all the good snacks for yourself. Sure, you have them, but they’re not exactly making you richer.

Disadvantages? Let’s make a list. Lists are always more dramatic.

• Eroding Like a Sandcastle: Inflation. It’s the silent ninja stealing your purchasing power. Each year my latte costs more. Each year.

• Returns? Hello?: Forget that risk premium other investments flaunt. My GIC is definitely judging my under-performing sock money. Big ouchie!

Okay, okay, I feel personally attacked. Who needs returns when you have…liquidity? It’s all about perspective, darling. I mean, try paying a plumber with mutual fund shares. No way! You might end up underwater – literally and metaphorically.

More to Ponder, If You’re Into That Kind of Thing

• Opportunity Cost: That dream vacation? That investment in my cousin’s “revolutionary” cat sweater business -_-? Cash could’ve fueled it!

• Temptation: Let’s be honest, that “rainy day fund” is really a “I deserve a new pair of shoes because I had a mildly stressful Tuesday” fund. Right? Just me?

What is the risk of holding cash?

Ugh, cash just sitting there, right? It’s gotta be losing value, I know it is.

• Inflation, duh. It’s eating away at it. Like, 3%? More?
• Purchasing power goes down. That’s the biggie.
• My stupid savings account… barely anything. Like 1%?

Why am I keeping so much cash anyway? Need to invest better.

Should check rates, the news… what’s the latest inflation? Okay, gotta DO something.

Why can holding too much cash be harmful to your wealth?

Ugh, cash. Okay, so like, inflation eats it away, right? My grandma’s always saying that. Should call her…

• Inflation: Real money loser.

Yeah, feels weird just sitting there. Like, it’s not doing anything. Missed potential.

• Missed Opportunity: No growth = stagnation.

Remember that time I left like, $200 in my jeans pocket and forgot about it for months? Found it all crumpled. Pointless.

• Cash is… static. Invest!

But it feels safe, doesn’t it? Like a security blanket. Except it’s a security blanket that shrinks.

• False Security: Inflation is silent thief.

Guaranteed returns, lol. Guaran-freaking-teed to lose value. Inflation’s a sneaky little thief. Seriously.

• “Guaranteed” Loss: Returns

Here’s the thing: It’s not about losing money, it’s about losing purchasing power. Duh. Buying less with the same amount.

• Purchasing Power: Key concept destroyed by cash.

Need to move money outta savings. What about that crypto thing my brother keeps talking about? Nah… too risky, maybe?

• Alternatives exist. Explore!

What are the advantages of holding cash?

Cash…it’s a strange comfort, isn’t it? Like having a little secret.

It’s always there when you need it. Instant access.

• Like that time my car broke down, miles from anywhere. The only tow truck took cash.

There’s a peace of mind in knowing it won’t vanish overnight, unlike stocks.

• Remember the 2008 financial crisis? Seeing everything plummet was horrifying. Cash would have shielded me then.

Markets go up and down. It’s a rollercoaster. But cash just sits there. Steady.

• My brother lost so much in crypto. I stick with CDs.

It’s just so… easy. Swipe, tap, gone. No hoops.

• Paying the rent, buying groceries, it’s simple.

Accessible everywhere, almost. Ubiquitous acceptance, that’s the word.

• Farmer’s markets, small shops, that guy selling peaches on the roadside. Cash is king.

The fear that gnaws at you… that’s when cash feels good.

What happens if a company has too much cash?

It’s late. You know, sometimes I wonder about all this… money.

Too much cash, huh? A strange problem, I guess.

• It’s like hoarding something precious.

• Missing out maybe?

ROA suffers. It feels like a waste.

Remember 2019? When I sat on that little inheritance, instead of investing.

• It just sat there.
• Fear, I guess.

Opportunities lost, maybe. Regretful decisions.

Additional information:

• Missed Investments: I could have bought that piece of land near my parents’ house. Now it’s worth triple. Ugh.

• Return on Assets: Lower ROA for my nonexistent company? What a joke. I really should stop dwelling on what-ifs.

• Lost Opportunities: It is what it is. I wonder what I will do now?

What are the 3 reasons for holding money?

Oh, money. Like a needy cat, we always seem to be chasing it! Keynes, bless his heart, figured out why we hoard it like squirrels hiding nuts. Three reasons, he declared!

1. Transactions, darling! You need it to, ya know, buy stuff. Obvious? Maybe. Still, like needing oxygen. Can’t live without!

2. Precautionary? Think of it as your “oops, I flooded the bathroom” fund. Or for that surprise Beyoncé ticket. Gotta be prepared!

3. Speculation! Ooh, this is where it gets fun. It’s gambling, but with a fancy economist’s hat on. Waiting for the perfect moment. Then boom profit! Or not… 😉

• Transactions: The daily grind of buying lattes and paying for parking. Imagine life without this liquid lucre? Nightmare fuel.
• Precautionary: The “just in case” stash. Because life loves throwing curveballs. Like, a pigeon decided your head needed decorating. True story.
• Speculative: Playing the market like a maestro. Timing is key, baby! Or just pure, dumb luck. And by the way, it is 2024, not 1936!