The investing upside of having more cash on hand than you need

In a paper called “How Your Bank Balance Buys Happiness: The Importance of ‘Cash on Hand’ to Life Satisfaction,” researchers stacked up the bank account balances for nearly 600 Brits against their reported levels of happiness.

Turns out that liquidity makes us feel better.

“Holding investments and not being in debt are both associated with greater financial well-being, but having cash “on hand” is meaningful above and beyond those measures of wealth,” wrote co-authors Peter Ruberton and Sonja Lyubomirsky of the University of California, Riverside, and Joe Gladstone at the University of Cambridge.

“While many individuals believe that increasing income or total wealth will improve their happiness, they may also benefit by building a financial buffer in their checking and savings accounts. We found this buffer to be associated with improved well-being regardless of how much a person earns, invests, or owes,” wrote the academics.