How much in cash equivalents should I keep in the bank? [duplicate]
In personal finance circles this is called an Emergency Fund. There are many opinions about how big it needs to be but most seem to come in around 3-6 months worth of your average expenses. Any more than that and you're going to loose money to inflation, less and you will start having problems if you get laid off or have a medical issue.
Firstly, I'm going to do what you said and analyze your question taking your entire family's finances into account. That means giving you an answer that maximizes your family's total wealth rather then just your own. If instead of that your question really was, should I let my parents buy me a house and live rent free, then obviously you should do that (assuming your parents can afford it and you aren't taking advantage people who need to be saving for retirement and not wasting it on a 25 y/o who should be able to support him / herself). This is really an easy question assuming you are willing to listen to math. Goto the new york times rent vs buy calculator and plug in the numbers: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html Firstly, if you do what you say you want to do buy the house all cash and live there for 4 years, it would be the equivalent of paying 1151 / month in rent once you factor in transaction costs, taxes, opportunity costs, etc. Take a look at the calculator, it's very detailed. This is why you should never buy houses all cash (unless its a negotiating tactic in a hot market, and even then you should refi after). Mortgage rates are super low right now, all that money sitting in the house is appreciating at maybe the rate of inflation (assuming the house value isn't going down which it can very easily do if you don't maintain it, another cost you need to factor in). Instead, you could be invested in the stock market getting 8%, the lost opportunity cost there is huge. I'm not even considering your suggestion that you hang onto the house after you move out in 4 years. That's a terrible idea. Investment properties should be at a maximum value of 10x the yearly rent. I wouldn't pay more then 72K for a house / apartment that rents for only 600 / month (and even then I would look for a better deal, which you can find if you time things right). Don't believe me? Just do the numbers. Renting your 200K house for 600 / month is 7200 / year. Figure you'll need to spend 1% / year (I'm being optimistic here) on maintanence / vacancy (and I'm not even considering your time dealing with tenants). Plus another 1% or so on property tax. That's 4K / year, so your total profit is 3200 which is a return of only 1.6% on your 200K. You can get 1% in an ally savings account for comparison. Really you are much better off investing in a diversified portfolio. You only need 6 months living expenses in cash, so unless your family is ridicuouly wealthy (In which case you should be asking your financial planner what to do and not stack exchange), I have no idea why your parents have 200K sitting around in a savings account earning 0. Open a vanguard account for them and put that money in VTI and your family will be much better off 5 years from now then if you buy that money pit (err house). If risk is a concern, diversify more. I have some money invested with a robo advisor. They do charge a small fee, but it's set it and forget it with auto diversification and tax loss harvesting.  Bottom line is, get that money invested in something, having it sitting in a bank account earning 0 is probably the second worst thing you could do with next to buying this house. From Chase FAQ it looks like this is a regular ACH transfer. ACH transactions can be reversed under certain conditions. I haven't been able to find some authoritative link on this, so I suggest this (thenest.com budgeting blog) instead: Allowed Reasons You can have ACH transactions reversed for one of three reasons under   the rules: wrong money amount, wrong account or duplicated   transactions. For example, if your mortgage bill is for $756.00, but   your lender's website messes up and you're charged $856.00, the   transaction is reversible it because it's the wrong dollar amount. If   the website charges you $756.00 twice, the second duplicated   transaction is reversible. Reversal Procedures You might have to bring a mistake to the originator's attention to get   it fixed. Only the originator -- the person or company taking or   sending money -- can ask for a reversal. For example, if you have a   transaction for a wrong dollar amount from your lender's website, the   originator is the lender. An originator is supposed to send the   reversal within 24 hours of the error's discovery and within five   banking days of the original transaction. When a reversal is required   because of a wrong amount or wrong account, the originator must send a   correcting entry with the right information. Bank's Responsibility A bank should honor an ACH reversal, even if it means debiting a   customer's account again because of a correcting transaction. However,   the bank doesn't have to debit your account if you closed it or the   new transaction would overdraw it. Your bank does have to tell you if   a correcting entry is going to take money out of your account, but the   bank doesn't need your permission to do it. One of the main advantages is that duplication from a few sources is no longer a vector.  The two big examples, the lesser first, card skimming and breaches like Target's.  The chip essentially generates a unique transaction code, and that is generated inside the chip.  So even if you installed a chip skimmer, you'd have to beat the merchant to using the code, and it would only be good once.  The same is true if you get something like the Target breach.  Instead of a giant dump of card numbers, you get a giant dump of used codes, which aren't very useful for getting money.  Even if the risk of stolen cards goes up, it should be a huge advantage for the banks.   Additionally, a number of the banks are now implementing quick and short term freezes, like the Discover It card app.  You simply click freeze in the app if you aren't sure where your card is, and unfreeze it when you do.  The assumption here is that people are more likely to freeze it and do so sooner than if they have to wait for a new card in the mail.  Theoretically, there's nothing stopping a consumer from keeping the card frozen all the time, and unfreezing it when they walk into a store, except the impracticality of it. "9% would be an absurdly high rate in the US by today's standards, so you should at the very least consider refinancing to fix that. Paying off completely is of course another way to fix that.  Which approach makes more sense depends on what you plan to do with the money instead if you do refinance -- if you can put it in an investment which yieds a higher percentage than the loan costs you, than refinancing the mortgage could actually be a profitable decision. You also need to consider what the bank will want to see in order to give you a mortgage on the new property. I have no idea whether they'd be happier that you had no prior mortgage, that you had the mortgage but also had the cash to pay it off, or if they wouldn't care. Remember that you want to be able to make at least a 20% down payment on the new property to avoid the insurance fees. That requires that you have a reasonable amount of cash-equivalent on hand. And generally, ""house rich but cash poor"" is an awkward state to be in." Depending on the country, nothing.  For example, the US has about $1.3 trillion dollars of cash in circulation.  Which means that if you were to burn a million dollars of it, that would be 0.000077% of  the circulating cash.  But cash is a small portion of the actual money in the US.  Only about 8% of all money is in cash, the rest is in other forms of value, which means that you'd only be destroying 0.0000062% of the US's money if you burned a full $1,000,000. If I were you I would just save the money until I had at least 5000 pounds to keep as an emergency fund. There are various kinds of unexpected events and it is smart to have some cash in case a problem comes up. Next time I would recommend buying a car you can afford. Borrowing money to buy nice things is the enemy of wealth accumulation. Also, when you buy a car for cash you will get a much better deal than when you let a dealer put his foot on your neck. Government default doesn't mean that all US money is immediately worthless.  First, the bondholders will get stiffed.  Following that, interest rates will shoot up (because the US is a bad credit risk at this point) and the government will monetize its ongoing expenses -- i.e., fire up the printing presses. If you're concerned about not having access to your money, start pulling out a little extra when you get cash at an ATM.  Build it up over time until you have enough currency to weather through whatever emergency you envision with your bank account. "tl;dr It's a difference between cash and cash equivalents and net cash and cash equivalents.  Download the 2016 annual report from http://www.diageo.com/en-us/investor/Pages/financialreports.aspx On page 99 is the Consolidated Statement of Cash Flows at the bottom is a section ""Net cash and cash equivalents consist of:""   Net cash and cash equivalents consist of: 2016-06-30   2015-06-30 Cash and cash equivalents                      1,089          472 Bank overdrafts                                 (280)         (90)                                                  809          382  The difference between net cash of 809 million and 382 million is 427 million, matching the ""Change in Cash and Cash Equivalents"" from Yahoo. I do not know that bank overdrafts mean in this situation, but appears to cause cash to show up on balance sheet without being reflected in the net cash portions of the cash flow statement. And the numbers seem like balances, not year of year changes like the rest of the statement of cash flows.  2015 net CCE              382 2016 cash flow          + 427                          ---- 2016 net CCE              809 Cash from overdrafts    + 280                           ---- 2015 balance sheet cash 1,089"