As said by Jack Welch, American business professional, “Cash is King,” but does the quote serve right? While cash is indeed king in case of liquidity, in an economy that is focused on growth, an excessive amount in the bank accounts can lose the growth momentum. Large bank balances can comfort the mind because of financial illusion, but certain economic forces like inflation can lead to a diminishing of the value.
The inflation trap
According to data by Trading Economics, the inflation rate as of September 2025 is at 1.54% which is significantly down from 3.16% recorded in April 2025.
However, the basic interest rate in a savings account is at 2.50% p.a., which means the money kept in the savings account is growing at a rate of just 2.50% every year. Now, considering the rate of inflation, the value increment in the savings account is negligible. Besides this, the inflation rate is always volatile.
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The 50-30-20 budget rule
Maintaining the right balance in the savings account is essential for peace of mind, not just in the present but in the future too. After all, the savings are the pivot of a healthy financial state. The 50-30-20 budget rule is widely accepted, and it helps to save the correct amount while the rest of the cash beats inflation and increases its value for future needs, and it also helps to manage debt strategies.
This division varies for different age groups:
Age 18-25: 50% of the amount to be divided equally into savings for emergency and uncertain needs and investment for capital appreciation. 30% to be used for necessity spends and the rest 20% for wants like dining out, entertainment, and luxury purchases.
Age 25-35: 50% to be kept for necessary spending. 30% of the amount is to be divided equally into savings in bank accounts and investments, 20% to be kept for luxury spending.
Age 35-50: 50% of the amount to be used for necessary expenses, 30% to be used for non-essential spending, and 20% to be divided equally into savings and investments.
Age 50-60: 50% for necessity spends, 30% for wants, and the remaining 20% in savings and investments, divided equally.
Age 60 & above: Redemption from invested capital to be distributed as 50% in savings account for spending, 30% in debt instruments, and the rest 20% to be re-invested in aggressive portfolios.
As said by Warren Buffett, Chairperson of Berkshire Hathaway, “When people talk about cash being king, it's not king if it just sits there and never does anything.”
