Is Cash Really King? Making Smart Money Moves

This question came up at our Saturday workshop as we explored exchange-traded funds (ETFs) in our “How to Grow your Money” series. One participant shared how she was increasingly feeling foolish for holding cash, wondering whether she was losing out by leaving all her money sitting in a bank account instead of investing it. Her comment sparked a lively discussion, especially given the current economic climate, with the rising cost of living and growing political uncertainty across the world. Here are some of the key points we discussed, which I thought would be valuable to share.

1) When Cash is Not King

While it feels safe and tangible to have physical money in our wallets or funds sitting in non-interest-bearing accounts, idle cash actually loses value over time. This happens because inflation gradually erodes its purchasing power – meaning the same $100 today buys you less in the future.

On top of that, keeping large amounts of cash can mean missing out on the opportunity to grow your money through investments. Whether it’s stocks, bonds, ETFs or even high-yield savings accounts, investing allows your money to potentially earn returns and build wealth instead of stagnating.

In short: Cash left idle is quietly shrinking in value

2) When Cash Is King

That said, we cannot rush to invest every dollar we have either. Think of cash like the king in chess, seemingly slow, but absolutely crucial to the game. Having some ‘idle cash’ acts like a cushion, giving us comfort and flexibility. We need cash for everyday expenses like groceries and transport, unexpected bills or emergencies and situations where digital payments fail (like an internet outage or a lost phone). Further, a well-funded emergency fund in cash also provides a safety net, protecting us from having to sell investments at a bad time – like during a market downturn or personal crisis.

Bottom line: Cash keeps our lives functional, and reduces financial stress

3) When Cash makes Us feel like Kings (and Queens!)

Beyond daily spending, idle cash can be a powerful investment tool. Even though it feels frustrating to have idle cash sitting around ‘on the side-line’ and not earning much, having cash ready allows one to seize investment opportunities when they come. Think about it this way:

Losing 5% a year to inflation is worth it if we can jump on an opportunity that earns us 10% or more.

Having cash at the right time can make us feel like kings or queens – ready to move quickly and play smartly

So is Cash King?

The key to financial empowerment is not blindly following the “cash is king” rule – it’s about understanding the role of cash in your overall money plan. It is about balance of cash versus investing – keeping enough cash for your immediate needs and peace of mind ; investing excess funds thoughtfully for long-term growth.

There is no perfect formula – the right amount of cash depends on your personal circumstances. For example, as I have gotten older and a little more risk-adverse (simply because my working years are fewer), I personally aim to set aside about two years’ worth of expenses in a mix of saving accounts and fixed deposits while investing the rest carefully.

Right now, I do have quite a bit of cash on the side-line – but it is not just sitting there for no reason. It is ready to move, like players waiting for the right moment to score a goal once the field opens up.

Final Thoughts: Smart Cash Management is Financial Power

Cash alone won’t grow your wealth, but cash used smartly can.
Understanding how much to hold, when to use it, and when to invest it is the real financial game-changer.

At Empower2Free, we believe learning how to manage your cash well — alongside your investments — is a powerful step towards financial independence.