It is possible to have too much float

It’s important to have enough money in your account to not have to worry when your bills are paid, but too much float brings problems too.

Pearl Harbor is a beautiful memorial.

I was there a few years back as part of my I’ve-never-been-to-Hawaii tour (which, incidentally, was the trip I was on when I launched this site). When you’re on the Big Island, going to Pearl Harbor is one of the most essential visits you can make, once you get beyond the beach at Waikiki.

There are a number of sites at Pearl Harbor, but the centerpiece, surely, is the USS Arizona, still sitting in the harbor, just below the water line. You actually take a boat out to the site, to a floating memorial which sits above—but doesn’t touch—the sunken battleship.

It’s haunting, beguiling, and serves as a reminder that history isn’t just stuff that happened in the past. It’s sitting right there, as lessons for anyone brave enough to look hard at it.

I loved the visit, of course, but what I remember most strongly, was the visit I made to the ATM.

The ATM

There must have been a reason why I just picked a random, freestanding ATM, as I generally try to avoid using those.

My memory is that the ATM was right on the waterfront, by the ferry terminal that took us out to the USS Arizona. But it must have been attached to the main visitors center.

People leave their receipts in automated machines all the time. I don’t know if the machines print them when they don’t want them, or if people do want them but then forget to collect them.

What I do know is that on that lovely afternoon, there was an ATM receipt lying in the little receptacle, still sitting there from (presumably) the last user of the machine.

I took out a reasonable sum, maybe of $40 of so, about enough for a single meal in Hawaii (rim shot!). I always get receipts, just as a way to have an in-the-moment check on my balance and to see if anything unexpected has happened.

Which was when I noticed the other receipt.

The receipt

I’ll admit, I’m a nosy person. I’m just curious, and especially so about things left in the open. I wouldn’t ever go through someone’s wallet if I found one, but if something isn’t personally identifiable, and it’s right there, well.

The point being, there was someone else’s receipt there, and I read it.

I don’t recall the specific amount withdrawn. I only remember the account balance, which was somewhere in the vicinity of $200,000.

Wow.

(I’m sure I took a picture of this receipt, but I guess I must have deleted it at some point, because I looked everywhere and wasn’t able to find it. Alas.)

The sum

Can you imagine? $200,000 sitting there in a checking account?

I know everyone’s situation is different, but no matter how many ways I think about it, I come to the conclusion that $200,000 is far too much money to have sitting around in liquid, ATM-able assets.

Why would someone have $200,000 floating around?

• They were about to buy a house or other expensive item. People do buy houses for cash (which is annoying if you are bidding for the same property, and you’re not). But even if you were about to lay down 2,000 Benjamins on a property, would you really want that in your checking account?
• This person is two orders of magnitude more wealthy than most of us. I know we live in this crazy world of wealth inequality, so it’s definitely not inconceivable to imagine that $2,000 to us would be $200,000 to someone else.
• This person is too afraid of the market to do any investing. In which case, $200,000 isn’t actually a lot of money. At most liquid interest rates, that $200,000 isn’t going to be worth a whole lot more in the future, even 30 years in the future.

Let’s recap here

You want to have enough float in your checking account so that, at bare minimum, you don’t have to worry about running out of money in your everyday activities.

Beyond that, you can have more float in your account, so that you don’t need to worry about when certain bills can be paid. So that you never have to say “I can’t pay that bill until the end of the month“.

Beyond that, you even want to have enough float in your account so that you aren’t in a pinch when the unexpected happens, such as an incorrect debit on your account, as happened to me recently.

But beyond that, you don’t want to have any more money in your account. Why?

• Over the long term, money works best for you when it is invested in long-term capital appreciation opportunities, such as in mutual funds. When inflation is factored in, you are losing money when you keep it in a checking account.
• Over the short term, meaning when you might need the money in a 1-5 year time period, a savings account can offer a superior return than a standard checking account. You can get returns of upwards of 2% on online savings accounts, which isn’t much, but is about enough to offset the effect of inflation, so at least you’re no longer losing money.

But unless you’re about to make a $200,000 purchase, keeping that much money in an account that’s linked by a debit card? That’s just too much.

Can you think of a reason to have $200,000 sitting around in a checking account?