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How much money ? September 4, 2007

Posted by Sharath Rao in economics, life.

How much cash do you carry, asks Bryan Kaplan.

At a recent GMU lunch, two economists sparred over the optimal quantity of cash to keep in one’s wallet. Economist A holds very little cash, on the grounds that you can pay for virtually everything with credit cards. Economist B holds lots of cash, on the grounds that the foregone interest is virtually nothing, and his time is very valuable.

Whose side do you take, and why? Value of time and foregone interest calculations are welcome.

I have so far been a student with rather paltry disposable income, so maybe I don’t count. Nevertheless, to offer an opinion, I generally cash of around $10-$15. ( Take it ! all you muggers out there 😀 ). I pay by credit card whenever I can, and pay the whole balance at the end of the month. So I don’t pay interest. I have a fair idea of where my bank ATMs generally are ( like we do in India), so I don’t generally pay the $2.00 transaction fee (using other ATMs). Except when I am traveling, in which case I might be carrying upto $50, but never more. All of these habits are in keeping with the minimalist I (think) I tend to be. At least in this case I think calculations of time saved is an overkill. My 30 seconds count for nothing compared to the peace of mind carrying cards.

In India until 2004, I would be carrying an average of Rs. 50. But thats as a student. I have no idea what I would have been doing as a working professional. No, I do – I guess pretty much the same as above to the extent I could.

P.S : For the last few days I have been carrying a 5 rupee note alongside the dollar bills. One of these days I am going to offer that at the counter and see what happens. :p



1. srivishnu - September 5, 2007

eagerly awaiting the reaction of the person at the end of the counter…

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