March 2026 - Upbeat Wealth

The Risk of Holding Too Much Cash & What to Do About It

Too Much Cash?!

Yes, it’s possible.

Much like any time I sit down with a spoon and a pint of Ben & Jerry’s, the same holds true with cash… You can, in fact, have too much of a good thing. When it comes to the ice cream, I always do. When it comes to your cash, we want to help you avoid “overindulging”.

Of course, cash has its benefits:

Security
Financial flexibility
Easy access to your money

Even so, there’s a very real tradeoff. What you gain in safety, you give up in potential growth and progress toward longer-term goals.

Risk #1: Inflation

As we all know too well, stuff gets more expensive over time – except, of course, for the Costco hot dog. One dollar today doesn’t buy what it did 20 years ago. This is the handiwork of inflation. It erodes the real value of money through the years, reducing your “purchasing power”.

The graph below shows year-over-year inflation during the last decade.

Source: https://www.bls.gov/

Even now, with inflation cooling, prices were 2.4% higher in February of this year relative to February 2025.

If your dollars aren’t growing at a rate that outpaces inflation, you are losing money in terms of actual spending capacity. An account balance of $100k 30 years from now won’t do nearly as much for you as it would today.

In fact, going off inflation data for the last 30 years, it would do about HALF as much! To buy the equivalent amount of goods and services with $100k in 1996, you’d need $211k today (based on this CPI calculator).

Thanks, largely in part, to the post-COVID spike, the average annual inflation rate over the 10-year period between the start of 2016 and end of 2025 was 3.2%. The Federal Reserve has a target inflation rate of 2%. So even in “the best of times” prices are still expected to go up.

Cash vs. Inflation, an Example

Let’s take a look at what inflation would have done to even a relatively favorable cash position over the last 10 years.

The State Street SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), as the name indicates, invests in Treasury bills with maturities of 1-3 months. Because T-bills are issued by the US government, they’re considered to be nearly risk-free and are a “cash alternative”.

We’ll match that up to the overall US stock market, using the Vanguard Total Stock Market Index ETF (VTI). Specifically, we’ll view the performance of these two funds for the 10-year period from 1/1/2016 to 12/31/2025.

Assuming that dividends were reinvested, the overall return for each of these funds during the stated period was:

BIL: 2.04%
VTI: 14.25%

Here’s what that looked like:

Source: https://totalrealreturns.com/

If you were in search of safety for your money, BIL would have done well preserving your capital while earning some interest. $10,000 would have grown to $12,236.59. This is roughly what your cash would have done had it been sitting in a high-yield savings account during that stretch.

However, there’s one (now hopefully obvious) flaw here. The 2.04% overall return is before accounting for inflation. The returns above are what we call “nominal”. When we adjust for inflation, we work with what’s called the “real” return.

So here’s how those funds compare over the last 10 years with inflation (CPI-U) baked in…

Real Return

BIL: -1.12%
VTI: 10.71%

Source: https://totalrealreturns.com/

In terms of what your money could actually do for you, it would have lost value if left in BIL for 10 years.

If that same $10,000 was collecting dust in a checking account or traditional savings account, earning 0% to 0.05%?? Forget about it.

Risk #2: Longevity

At this juncture, some people out there may wonder, “What’s so bad about losing just ~1% over 10 years? At least my money wasn’t subject to big swings in the market. In the end, I barely lost any purchasing power.”

Well, sure. But it’s a simple fact: the longer you want (or need) your money to support your lifestyle, the more of it you need to have. So the growth rate of your assets over time directly contributes to the length of the runway you build up for yourself.

This isn’t to say you should go full throttle on the most aggressive investments you can get your hands on. There’s a wonderful world that exists between the extremes. But it underscores the importance of taking a risk-appropriate approach to growing your wealth so that you set yourself up for the best chance of success in realizing your ideal future state.

What is the RIGHT Amount of Cash to Hold?

To determine the “right” amount of cash…

Calculate your Emergency Fund need
Evaluate any short-term goals (new car, vacation, home project, etc.)
Add these together and voila!

We recommend keeping these funds tucked away in a high-yield savings account. To take it one step further, we favor using an option like Ally that allows you to create “buckets” within a single account. That way, you can easily categorize the savings and always know exactly what each dollar is set aside for.

And bear in mind, the point of this cash is NOT to be a growth engine in your plan. Rather, it DOES…

Cover you when something inconvenient inevitably occurs
Help prevent the need for taking on higher-interest debts (credit card balances)
Allow for quick and easy access
Avoid market losses

OK, Now What?

Once you’ve established the optimal cash balance to keep on hand, it’s time to create a plan for the rest. One benefit of getting clear on your cash need is that it frees you up to take on more risk (appropriately) with other resources, creating more efficiency all around. Having adequate cash set aside increases your plan’s risk capacity. In other words, with your bases covered, you are in a position to handle greater risk in the accounts geared toward your long-term goals.

In short, that “extra” cash is ready to be invested.

Similar to what you did above, ask yourself: What is the purpose of these surplus funds? What will they ideally do for you? Additionally, consider the anticipated timeline before you expect to access them.

Addressing these points will guide what type of investment account those resources go into and how much risk you can reasonably take on when they get to work. For example, money tagged to help support your retirement at age 60 makes sense going into a Roth IRA, where it might be allocated to 100% equities. Funds that will be used to help with a down payment 6 years from now are not as well-suited in an IRA, nor should they be invested so aggressively. Those will serve you better in a taxable brokerage account, with a more conservative approach.

Cash plays a critical role in your financial plan. Yet, it pays to understand its limits and what to do if you can identify any excess.

Frequently Asked Questions for Cash

Q1: How much cash is too much to keep in savings?

You may be holding too much cash if you’ve already set aside enough for your emergency fund and any short-term goals, but still have a large amount sitting in checking or savings with no clear purpose. Cash is useful for flexibility and protection, but too much of it can quietly slow your long-term progress if it isn’t keeping up with inflation.

Q2: Why is holding too much cash a problem?

The biggest issue is that cash often loses purchasing power over time because of inflation. Even if your account balance stays the same, or grows a little, the real value of that money can decline if prices rise faster than your interest rate. Over long periods, that can create a meaningful drag on your financial plan.

Q3: Is cash losing value because of inflation?

Yes. Inflation reduces what your dollars can buy over time. That means money sitting in cash may feel “safe,” but if it isn’t earning enough to outpace rising prices, it is losing real value in the background. This is one of the main reasons excess cash can become costly over the long run.

Q4: Where should I keep my emergency fund?

Your emergency fund should usually stay somewhere safe, liquid, and easy to access—typically a high-yield savings account. The goal is not maximizing return. The goal is making sure the money is available when you need it, without taking market risk.

Q5: Should I invest money instead of leaving it in cash?

If the money is not needed for emergencies or short-term goals, investing may make more sense than leaving it idle in cash. The best place for that money depends on its purpose and timeline. Money needed soon should generally stay conservative, while money for long-term goals like retirement can usually tolerate more investment risk.

Q6: Is a high-yield savings account enough to beat inflation?

Not likely. A high-yield savings account can help reduce inflation drag compared with a traditional checking or savings account, but it won’t consistently outpace inflation over long periods. It can be a great tool for cash reserves, but it usually shouldn’t be your primary strategy for long-term wealth building.

Eddy Jurgielewicz, CFP® is a Partner and Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.

Do you have questions about what we shared in this post, or anything else in general? Feel free to schedule a free consultation or drop us a line!

Disclaimer: All content in this article is provided for educational, general information, and illustration purposes only. None of the information is intended as investment, tax, accounting, or legal advice. Nor is it a recommendation for purchase or sale of any security, or investment advisory services. We encourage you to consult with a financial planner, accountant, and/or legal professional for advice on your specific situation. Read our full disclaimer here.

behavioral finance financial literacy

Should You Buy or Lease a Car in 2026? Costs, Financing, and Smart Strategies Explained

Why Buying or Leasing a Car Feels So Complicated

Choosing a set of wheels is on the Mount Rushmore of tough consumer decisions. It’s right up there with becoming a homeowner, choosing health insurance, or paying for childcare. And while having a roof over your head, access to good healthcare, and seeing to your child’s safety are probably more important, securing reliable transportation is by far the most aggravating of the bunch. It’s a pressure cooker of aggressive sales tactics, opacity, and time-consuming negotiations. All set to leave you emotionally drained and ready to just be done with it already.

How can anyone reasonably expect to compare all deals when the combinations are endless and constantly changing? We can trick ourselves into thinking we got the “best deal”, but you’ll truly never really know. Furthermore, you won’t even know if it was a good deal, let alone the “best deal” for you until 3, 5, or maybe 10 years after making it. So I truly believe that purchasing or leasing a car just had to *feel* good. And for something to feel good, you need to understand some rules of thumb and key terms. Let’s discuss the pros and cons of buying versus leasing, what to expect when financing, how to choose the right car, and ways to boost your leverage during negotiations.

Key Terms You Need to Know Before You Buy a Car

MSRP (Manufacturer’s Suggested Retail Price): As the name suggests, it’s what the manufacturer recommends you pay for the car.
Dealer Add-ons: Dealers sometimes add silly things like “paint protection,” which aren’t standard vehicle add-ons, to increase profit on a car.
Dealer Mark-Ups: Extra fee/profit added to vehicles in high demand with limited supply.
Sales Tax: State/Local Tax on Vehicle Price. Most states also allow you to deduct any trade-in value, lowering the amount you are subject to sales tax on.
APR (Annual Percentage Rate): When financing, the interest rate is separate from the APR, which combines the interest rate with any extra fees included in the loan.
Depreciation: Decline in a vehicle’s value over time, affecting resale value.

Key Terms You Need to Know Before Leasing a Car

Net Capitalized Cost: The price of the car that the lease payments are based on. Can include vehicle cost along with other fees not paid up front.
Residual Value: Set at the beginning of the lease by the manufacturer, it’s the estimated value of the car at the end of the lease. It’s also the price you have the option to buy the car for at the end of the lease. The actual market value at the end of the lease may be higher or lower.
Money Factor: the interest rate on a lease, but expressed as a small decimal rather than a percentage. To get the percentage, multiply the money factor by 2,400.
GAP Insurance: Covers the difference between what you owe on the car and the fair market value. Required by most dealerships, but you can add to your existing auto insurance policy rather than roll it into your monthly lease payment. It’s also a reason to try to avoid putting a down payment on a lease. If your car is totaled, the insurance company will just pay off what you owe on the car, not what you’ve already paid.
Mileage Allowance: Maximum miles allowed annually before incurring extra cost.

Buying vs Leasing: Which One Is Right for You?

When Buying Makes More Sense

Anticipate using the car for longer than the financing period, or at least 6+ years.

Drive the car more than the usual 10,000 to 15,000 miles per year common in leases, which can lead to higher mileage and wear-and-tear fees.

When Leasing Makes More Sense

Enjoy having a new car every 3 years.

Are uncertain whether you’ll want/have/need this car beyond the lease period.

Prefer less hassle/maintenance in your life.
Really just need a lower monthly payment because you have other financial priorities at the moment, or can’t afford a 20% down payment when buying a new or used car.

Still a little unsure? Here’s our firm’s flowchart for deciding whether buying or leasing your next vehicle is right for you.

The Cheapest Way to Own a Car Long-Term

Although the financing terms are important and leasing with a subsequent purchase at residual value could be advantageous, the most straightforward way to save money in the long term is to buy a car and keep it for at least a few years after the financing period ends. Even better, you hold onto it for up to 10 years, after which you’ll need to decide if creating an exit plan is worth it. This will depend on your daily usage and the vehicle’s manufacturer. I recommend that any prospective car buyer review the consumer reports on vehicle reliability and vehicle repair costs.

Hybrid vs Gas vs Electric: Which Is Most Cost-Effective?

Hybrid Break-Even Analysis

While there are clear environmental benefits to choosing a hybrid or electric car, I often hear broad claims that it’s also a cost-effective option. Let’s start with a hybrid vehicle. I actually ran this calculation for myself a few years ago when purchasing a car.

The Inputs:

Hybrid Surcharge: $3,500
Annual Mileage: 12,000
Average Gas Price: $3.25/gallon
Non-Hybrid Miles Per Gallon: 24
Hybrid Miles Per Gallon: 35
Non-Hybrid Annual Gallons Used: 500
Hybrid Annual Gallons Used: 342

Ultimately, it would cost $1,625 (500 x $3.25) annually to fuel the non-hybrid version of this car compared to $1,112 (24 x $3.25) for the hybrid. The hybrid would save our family $513 each year. Since it costs an extra $3,500 to buy the hybrid, it would take nearly 7 years to break even given those assumptions. While I was hoping the break-even would come a few years earlier, this still felt like a victory for our family because I knew we’d keep this car for over 10 years. Or so I hope to, as I admit I am taking a bit of a gamble since I don’t know much about the inner workings of a hybrid car and its expected shelf life versus its non-hybrid counterpart.

Are Electric Vehicles Worth It Financially?

Before the federal EV tax credit expired, going electric seemed to make a lot of financial sense. Even the leases on EVs were very cheap because dealers passed the tax credit through in order to attract folks to make the switch. Since we were buying a vehicle to be our primary family car, an electric vehicle wasn’t an option for us. For hurricane evacuation, we needed a vehicle capable of transporting multiple kids and dogs through traffic that could be at a standstill for hundreds of miles, without the worry of not knowing where the next charging station would be.

But for a secondary vehicle just to get around New Orleans by car, I’d be surprised if I bought anything that runs on gas. Admittedly, I don’t know much about lithium-ion batteries or this technology, but the idea that I could have a car for 10-15 years with very little maintenance and no time wasted at the gas station seems luxurious. If the federal tax credit is reinstated in the future, or if your state offers its own, it’s definitely worth exploring. Unfortunately, there isn’t a universal answer because the same factors still apply to your intended use, expected maintenance, and price differences.

Is the “Buy Used” Strategy Still Worth It?

Here’s what the advice USED to be: buy a certified pre-owned car that is 1 -3 years old.

Rationale: Cars depreciate faster during those first few years, and you still have significant useful life left in the vehicle. See the chart below for why this is now a little more complicated.

Used car prices jumped 56% due to supply shortages that began during COVID-19. While they’ve come down in recent years, they’ve only decreased 16% from their post-COVID highs. In comparison, new vehicles *only* spiked 22% post-COVID, though prices have remained relatively flat since.

Certainly, this might still make a lot of sense, but you’re getting less value for your money with a car that usually has a shorter warranty and fewer years of useful life. The further you get away from a car being brand new, the more risk you assume in its remaining useful life.

Eddy Jurgielewicz, a partner and lead financial planner at Upbeat Wealth, has done most of his car shopping outside of dealerships. He filters online marketplaces for used, single-owner cars with no major accident history and few recalls. Yes, he would even target makes, models, and years that appeared to have few maintenance issues. But that was a kidless Eddy living in New Orleans, where owning a car was more for convenience than a requirement. I would be surprised if he used this strategy with a child while residing in Los Angeles for a primary family vehicle.

While buying used no longer seems like a slam-dunk strategy, there is still an opportunity to get a great deal. We know that the profit margins on used cars are usually higher for dealerships. And if you have the ability to negotiate in the private market, there’s definitely value in cutting out the middleman. Either way, that gives you a better chance to negotiate a price reduction. For some, this is worthwhile; for others, it may cause unnecessary stress.

How Leasing Can Actually Make You Money

The manufacturer sets a residual value for the car, which is your guaranteed price to buy it at the end of the lease. There’s always a chance that your residual value is less than the car’s fair market price (the price you could otherwise sell the car at), and you might have built equity unknowingly. Of course, you need the cash available to buy it, but if you do, it could work out in your favor. Think about everyone who leased a car before the huge rise in used car prices following COVID. Cars didn’t depreciate as much as manufacturers expected and had included in the leases because supply and demand dynamics changed dramatically. This created an opportunity for our family when we went to swap out car. We had a leased vehicle with a $17,000 residual value. However, the Kelly Blue Book Fair Market Value was $23,000. We bought our car for cash with no intention of keeping it. In fact, we traded it in a few days later to a dealership as a down payment for our next vehicle.

Downpayments and Financing

How much money is considered a sufficient down payment? A couple of different levels to this question.

If you know you want to buy a car, you should aim for at least a 20% down payment, whether that is cash, the trade-in value of a prior vehicle, or a combination of both.
HOWEVER, if you are in a strong financial position and could purchase the vehicle outright, that doesn’t mean you SHOULD put 20% down or pay in full.

Here’s the rationale. A 20% down payment keeps your monthly payment manageable. If you haven’t been saving toward the purchase of a car to begin with, you might struggle to pay off the increased monthly payment that comes with putting less than 20% down.

On the flip side, if you could just pay off the car anyway or aren’t worried about the monthly payment, then the interest rate dictates how much you should finance.

0 – 3%: You could make more money in a High-Yield Savings Account, so finance as much as possible.
4 – 6%: Maybe your money can beat this in the market; maybe not. Use a hybrid approach and put down at least 20%, probably more. Consider prepaying as well, assuming no penalties.
7%+: Finance as little of it as possible. Assuming you have cash reserves beyond this, the flexibility of holding cash isn’t as valuable to you.

Thinking about the financing term isn’t much different. Great rate? Finance for a longer period. Meh rate? Ideally finance as close to 36 months as possible. Terrible rate? Finance for a maximum of 36 months. And usually, the interest rate incentives/deals are tied to specific term periods. As another general rule of thumb, we find that households with annual debt exceeding 33% of gross income (mortgage, student loans, auto loans, personal loans) tend to feel a little strapped for everything else.

Financing MATTERS, especially with current interest rates. Here’s a comparison of the real cost of financing cars with identical prices but different interest rates.

In this example, an interest rate of 7% versus 3.5% increases your car’s purchase price by 8%. And that’s not including rolling in the sales tax, title, registration, and other fees into the loan.

Smart Car Shopping Tips to Save Money

Shopping for a car isn’t enjoyable, especially when you desperately need one and feel trapped. For example, if your car is in the shop and you’re on a tight deadline to find a replacement. So our best advice for shopping for a car is to do so before you become a captive audience. This will help you establish a reference point for negotiation. Here’s our recommended framework.

Begin filtering cars by preferred size and reliability metrics.
Search online for any promotional purchase, leasing, and/or financing rates for these makes and models.
Check for any upcoming seasonal promotional events offered by these manufacturers.
Check when new models are usually released. This might lead to a better deal on last year’s model overnight.
Review inventory online at local dealerships, but also on sites like CarMax and Carvana.
Create a separate email to prevent spam in the future for your primary email and start inquiring about certain cars. This initiates the negotiation before you walk through the door.
Treat buying a car and trading in your car as separate deals. I prefer to negotiate the price of the new car first. Afterwards, you can discuss what I want to get for a trade-in.
Use sites like Carvana to get an automatic “buy it now” price for your current car and also check the Kelly Blue Book value. This provides some leverage to keep a dealer honest on the trade-in value.
Don’t let a salesperson reduce your car-buying process to a question of “how much do you want to pay monthly?” You’re after the best price, period! Over a long enough financing period, they can meet any monthly payment. That doesn’t mean it’s financially worth it to you. Focus on the total cost of the car.
A final reminder: the more leverage you have, the better off you’ll be. The less you *need* to do something, the more wiggle room you’ll find.

Frequently Asked Questions About Shopping For Cars

Q1: Should I buy or lease a car?

You should buy a car if you plan to keep it for more than 5–6 years, drive high mileage, or want to minimize long-term costs. Leasing may be better if you prefer lower monthly payments, drive fewer miles, and like upgrading vehicles every few years.

Q2: Is leasing a car ever a good financial decision?

Yes, leasing can make sense if the residual value is lower than the car’s market value at lease-end, or if you prioritize cash flow and flexibility over long-term savings.

Q3: What is the cheapest way to own a car long-term?

The cheapest strategy is to buy a reliable car and keep it for several years after the loan is paid off. This avoids ongoing payments while minimizing depreciation costs.

Q4: How much should I put down on a car?

A 20% down payment is a common guideline to keep payments manageable. However, if interest rates are low (0–3%), it may make more sense to finance more and keep your cash invested or in savings.

Q5: Is buying a used car still a good strategy?

It can be, but the advantage has narrowed due to higher used car prices post-COVID. Buyers should carefully evaluate price differences, warranty coverage, and expected lifespan.

Q6: What is the biggest mistake when buying a car?

Focusing only on the monthly payment instead of the total cost of the car. Dealers can adjust loan terms to hit almost any monthly payment, often increasing the total cost significantly.

Great Day Louisiana: Financial Advice For Car Shopping (originally aired on March 17th, 2026)

Mike Turi, CFP® APMA™ is the Founder and a Lead Financial Planner at Upbeat Wealth, a fee-only firm based in New Orleans and serving clients virtually across the country. He specializes in providing straightforward financial guidance to ambitious young families as they navigate life’s many milestones.