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BNY Mellon Wealth Management has centuries of experience helping individuals and families craft cash strategies. Applying our Active Wealth approach, we discuss the elements you should consider in building a cash strategy to meet your specific needs. 


The Value of Holding Cash


Cash is an important component of any financial plan. It can be an evergreen part of a holistic strategy, providing liquidity for bill paying, a source of funding for near-term liabilities, or a more strategic, longer-term purpose. With this in mind, it’s important for investors to understand how much cash they have and where it’s held, how much it’s yielding and the role it plays in their overall wealth plan. 


Understanding Your Liquidity Options


Investors now have numerous options to earn meaningful yields on their cash balances. But a comprehensive approach to managing liquidity extends beyond choosing the highest yields. Individuals should also consider liquidity, security, and the appropriate account location. 


Before determining how much cash is right for you, it’s helpful to think about when and how you will use it. We consider cash and cash alternatives in three distinct buckets: Operating Cash, Planning Cash and Strategic Liquidity. 


Operating Cash is intended for the payment of day-to-day living expenses. It typically has daily liquidity and a lower yield than longer-term cash buckets. 

Planning Cash is intended to cover recurring and known expenses within the next 6-18 months. Daily liquidity is generally available, but the money can be subject to early withdrawal penalties and market volatility, and yields exceed those on Operating Cash. 

Strategic Liquidity is intended for more permanent uses of cash held over periods exceeding 18 months. It has the lowest liquidity and highest yield of the respective cash buckets. 


Three Buckets of Cash


Risk Considerations for Cash Vehicles 


While cash investments are generally considered lower-risk investments compared to stocks or bonds, there are still several risks associated with them. Unlike financial securities which fluctuate in market value, cash deposits are intended to maintain their nominal value. Let’s take a look at how several cash options are subject to liquidity risk (the ease at which an asset can be converted into cash), credit risk (the possibility of default on obligations) and interest rate risk (the potential for losses due to a move upward in interest rates). 


Cash Programs and Three Key Risks

Notes: Bank Deposit Programs may be susceptible to illiquidity; MMFs could potentially implement liquidity fees or redemption gates during adverse market conditions. 


It is important to carefully consider the risks associated with cash investments and balance them with potential returns and investment objectives.


Understanding the Protections 


As noted in the table above, BNYM N.A. deposits are eligible for FDIC insurance up to $250,000 per depositor and $500,000 for joint accounts. Additional information on FDIC insurance can be found here. Furthermore, the regulatory nature of being classified as a Globally Systematically Important Bank (GSIB) requires BNY Mellon to maintain leverage and liquidity ratios in excess of banks with fewer than $250B in assets. Our company is consistently ranked among the top financial firms with strong external credit ratings. Additional information on our credit ratings can be found here.


Now’s the Time to Evaluate Your Cash Strategy  


On a periodic basis, all investors should evaluate their liquidity needs within their total wealth plan. This is an element within our Active Wealth approach, our comprehensive framework that helps investors build and sustain wealth. Doing so can help ensure you have the right balance of being able to meet your short-term liquidity needs, while maximizing your portfolio’s long-term performance.



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This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not in-tended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.


The Bank of New York Mellon, DIFC Branch (the “Authorized Firm”) is communicating these materials on behalf of The Bank of New York Mellon. The Bank of New York Mellon is a wholly owned subsidiary of The Bank of New York Mellon Corporation. This material is intended for Professional Clients only and no other person should act upon it. The Authorized Firm is regulated by the Dubai Financial Services Authority and is located at Dubai International Financial Centre, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE.


The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorized by the Prudential Regulation Authority. The Bank of New York Mellon London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon is incorporated with limited liability in the State of New York, USA. Head Office: 240 Greenwich Street, New York, NY, 10286, USA. In the U.K. a number of the services associated with BNY Mellon Wealth Management’s Family Office Services– International are provided through The Bank of New York Mellon, London Branch, One Canada Square, London, E14 5AL. The London Branch is registered in England and Wales with FC No. 005522 and BR000818. Investment management services are offered through BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, One Canada Square, London E14 5AL, which is registered in England No. 1118580 and is authorised and regulated by the Financial Conduct Authority. Offshore trust and administration services are through BNY Mellon Trust Company (Cayman) Ltd. This document is issued in the U.K. by The Bank of New York Mellon. In the United States the information provided within this document is for use by professional investors. This material is a financial promotion in the UK and EMEA. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products (including financial products) or services or to participate in any particular strategy mentioned and should not be construed as such. BNY Mellon Fund Services (Ireland) Limited is regulated by the Central Bank of Ireland BNY Mellon Investment Servicing (International) Limited is regulated by the Central Bank of Ireland. 

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The information in this paper is as of May 2023. It is based on sources believed to be reliable, but content accuracy is not guaranteed.


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