How much cash should I hold on to?

Thinking about replacing a car in the next 2-3 years.
I currently have about $30k cash in a high yield savings account but most of this should be considered emergency fund. Investing approx $15K a year in 401K + employer match. Maxing out Roth IRA. Don’t have a normal brokerage acct yet. Debt free besides mortgage.
Back to the car… does it make more sense to keep saving in the HYS, or am I wasting potential by holding on to cash? Should I be putting some of this money in a brokerage acct? If so, how much? And is paying the taxes on growth potentially more expensive than the interest on an auto loan??

Hi @Kmcfoulk

Thank you for the question! First off, congratulations on doing an excellent job with your personal finances. I love to hear that you are taking advantage of your employer match and maxing out a Roth IRA!!!

I think saving for a car in a HYSA is a great plan. I would not invest any money in index funds that you plan on using in the next couple of years. The risk / reward is just not worth it. Meaning, the stock market is impossible to predict over the next few months or few years. It only becomes somewhat predictable over longer periods of time.

This is a great post, highlighting how it doesn’t make sense to invest money you are planning to use in the next couple few years.