Back in March, when COVID-19 first enveloped the U.S. in a meaningful way, the hope was that its health-related and economic damage would be minimal. Fast forward four months, and we're still in pretty bad shape on both counts. Not only are COVID-19 cases surging, but unemployment levels are still through the roof as our country battles a recession that could easily last well into 2021. And that means now's the time to start stockpiling cash in the bank if you have the ability to do so.

Why you need cash on hand for the latter part of 2020

In the absence of a crystal ball, it's impossible to predict how the rest of 2020 will shake out. But here are a few things we do know:

  • The COVID-19 outbreak is getting worse, not better, on a national scale
  • Unemployment is still extremely high
  • Hard-hit states are adding restrictions and talking about lockdown measures

All of this means that the second half of 2020 could be even more devastating, financially speaking, for a lot of people than the first half of the year. And if you lose your job in the next month or so, there's a good chance you'll be out of work well into 2021.

Pile of hundred-dollar bills

Image source: Getty Images.

That's one reason you need extra money in the bank. Right now, lawmakers are debating whether or not to extend the $600 weekly boost to unemployment benefits that's been keeping millions of workers afloat for the past few months. That boost is set to expire this month, and if it's not extended, those who are out of work for the latter part of the year will need to rely heavily on savings to stay on top of their expenses.

But that's not the only reason you need a healthy pile of cash right now. In March, the sudden invasion of COVID-19 caused the stock market to tank, and while it's recovered since then, we can't write off the idea of a second stock market crash in 2020. And having cash on hand at that point will serve two purposes:

  1. It will put you in a position to leave your investment portfolio alone, thereby riding out that downturn and avoiding permanent losses
  2. It will allow you to invest when stock prices fall

Back in March, investors with cash on hand had a prime opportunity to load up quality stocks, and if a second crash ensues, you'll want that option, too. That's why it pays to pad your bank account now. Take the funds from your canceled summer vacation and put them into savings. Take the money you're not spending to commute to work or go out to the movies and move it into your brokerage account so you can pull the trigger on investments when the time is right.

Like it or not, we could be in for a very rocky second half to 2020, and the more cash you have at your disposal, the more likely you are to make it through the year financially unscathed. In fact, if you play your cards right, you may even find that your financial picture improves in the course of the next few months if you manage to capitalize on some great investment opportunities.