When working with investors

, we frequently talk

about cash on hand and

the different approaches

for managing that cash—

specifically how to increase

return. In our minds,

different circumstances call

for different solutions.

Below are some thoughts

we apply when discussing

our approach to cash

management.

TIER ONE

We call this your emergency fund, safety net or cash you hold for peace of mind. The amount or percent that this fund represents varies significantly by person, which makes it difficult to make specific recommendations. As a rule of thumb, we advise that you should keep 6 months of living expenses on hand in cash. To manage this fund, we use a solution called Flourish Cash. Flourish Cash is a high yield savings account that can be linked directly to your bank account so that you can make transfers on your own. There are no fees, no minimum balances and no limits on transactions. Flourish Cash offers 4 % interest annually( as of May 29, 2025) and has expanded FDIC coverage of $ 5 million for an individual account.

TIER TWO

We think of this as cash for which you have a specific need in the next 18 months. Generally, the transactions related to this fund are fewer and less frequent( tax bills, real estate purchase, etc.). For this, we recommend the use of a money market fund. Charles Schwab, our custodian, offers a Prime Money Fund that yields 4.13 % and a Treasury Money Fund that yields 4.01 %( as of May 29, 2025). These money market funds are invested in high quality securities issued by US and foreign entities such as corporations, financial institutions and the US Government. The intent is for these funds to maintain a stable $ 1 per share value. These funds are somewhat more time intensive in that they need to be purchased and sold as opposed to being a default holding.

TIER THREE

This should be the easiest fund to deal with as most immediate needs are met with the first two funds. The issue we run across is that investors can be emotional about subjecting this to any market risk. They’ ve spent a good part of their lives accumulating this fund and don’ t want to see it lost. Our challenge is to have the investor think long term with respect to this fund. We recommend the use of a fixed income

mutual fund or a ladder of fixed income securities to handle this. Both of these approaches target longer duration investments such as US Government bonds, corporate debt securities and certificates of deposit from financial institutions with maturities ranging from one to five years. While these securities have market risk as interest rates change, it does give an investor the ability to benefit from today’ s higher rates for longer.

I hope this article helps you frame your approach to cash so that you can build a plan to manage your cash reserves.

Shaw Pritchett is a

Financial Advisor and

President of Jackson

Thornton Wealth

Management in

Montgomery.

SHAW PRITCHETT

334.240.3679

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