Lifestyle
Hoarding Cash Might Be Hurting Your Future
Twenty-somethings are sitting on stacks of cash, with a hefty 27% of their portfolio, averaging around $40,000 in liquidity. However, experts warn that holding too much money in cash could disrupt long-term growth. Millennials and Gen Z have gone through a lot, pandemics, recessions, inflation, so it’s understandable that they feel cautious. If you’re feeling the same, let’s break down why it’s happening and how you can level up your money game without compromising peace of mind.
Why So Much Cash?
People are hoarding cash not out of laziness, but for self-protection. Many in their 20s or early 30s have seen financial chaos up close, especially from the 2008 crash to the pandemic. So it’s not surprising they’re hedging with cash instead of diving headfirst into the market. According to Empower, nearly 27% of assets are held in cash, second only to retirees. Median cash savings are about $40,275.
But, yes, being too safe can hurt and be costly. The cash won’t experience scary market dips, but it’ll also experience minimal growth and can be eaten away by inflation over time. Financial planners recommend keeping just 2-10% in cash, enough for emergencies but not so much that you miss out on compounding returns.
Why It’s More Complicated for Millennials & Gen Z
“Soft saving” is real, and it can be healthy sometimes. Rather than burning out for future gains, many are embracing “soft saving” by prioritizing mental health and quality of life with sensible saving habits. Over 70% of Gen Zers would rather enjoy life now than chase a fat bank balance decades from now.
On the other end, Millennials can suffer from money dysmorphia. Even when financially stable, Millennials often feel less secure. That mismatch between anxiety and actual account balances can lead to over-saving and serious stress. About 41% experience “money dysmorphia,” obsessing over every dollar as though financial security is always just beyond reach. As a Millennial, I feel this, but I dump any extra cash that I have into my Fidelity portfolio because I want to make the money compound earlier rather than later. I still make time for fun, for experiences, but I spend less on material things.
What the Playbook Can Be
Here’s how you can level up your money game without compromising your peace of mind.
| Strategy | Why it Works |
| Emergency-first mindset | Keep 3-6 months of living expenses in cash for peace of mind |
| Start small, think micro-investing | Automating even modest monthly investments taps compounding over the years |
| Frame your risk | You don’t need to go all-in. Consider safer index funds or diversified ETFs that grow while you sleep. I’m a fan of those that track the Total Stock Market like VTI. Other popular options can be VOO, which tracks the S&P 500. |
| Balance wellbeing with wealth | Budget for experiences + invest when you can. It’s possible to live with both clarity and comfort! |
The Money Move
Caution with money is understandable, especially for generations that have lived through multiple financial crises, rising student debt, and inflation shocks. Keeping cash on hand provides security and flexibility, but it can chip away at your long-term growth potential.
The real opportunity lies in balance: maintaining a healthy emergency fund while steadily putting the rest of your money to work. Even small, consistent investments in low-cost index funds or diversified portfolios can grow significantly over time, thanks to the magic of compounding. The goal isn’t to sacrifice your present for your future, but to create a system where both can coexist! Your savings can provide peace of mind today, and your investments can build the freedom you’ll need for tomorrow and beyond.
