Reasons to Have Cash Reserves

Generally speaking it is a good idea to build and maintain cash reserves of at least 6 to 12 months of non-discretionary expenses if you're working and 2 years or more of cash reserves during retirement years. The more stable your income and the less you spend each month the less you need to have in reserves (and vice versa). Even if you have you have high job security, cash is king and access to liquidity is vital as witnessed in the financial panic of 2008. The cash reserves are there to help keep you from going into debt or dipping into your long-term investments if you run into unexpected emergencies such as medical expenses not covered by insurance, broken home appliances, leaky roof, car trouble,etc or if you lose your job and are having trouble finding another one.

Also, if you know you're going to incur major expenses such as paying for a wedding, buying a home, or buying a new car, save those amounts away in addition to your reserves.

The goal is to maintain a fully-funded cash reserve at all times.