Here at Financial Freeman we have been warning about the dangers of inflation for some time and how you can't afford to just leave your money in the Bank indefinitely whilst it dwindles away. But that doesn't mean you shouldn't have any cash reserves. In fact we actually think you should if you can have more than some financial advisers would suggest you have. The popular approach is to say you need a rainy day fund of 3-6 months' earnings but there are other reasons to hold cash. What about 'sunny days' such as weddings or a new kitchen. Should you keep this money in cash even if the expenditure is not due for a few years? Many good investors also liked to be 'in cash' if they think the market is looking 'frothy' as it is much easier to stomach a bit of loss due to inflation vs. wild market swings. Finally, you may want to take advantage of any market dips. All in all, you need to think about these issues and work out what is right for your financial situation.
