With Interest Rates Rising, How Much Should You Keep in Savings? How to Decide on Cash Reserves to Keep Your NISA Going

“I’m investing in NISA every month, but how much should I keep in my bank account?”

If you are continuing to invest, I think this is a question that crosses your mind at least once.

I bought a house in 2026. My mortgage has a variable interest rate. We are a family of three with a small child.

On the other hand, I want to continue my monthly investments in the S&P 500.

This is because I have high expectations for the long-term growth of US AI-related companies, and I believe that periods when stock prices fall are also opportunities to buy more for the same amount of money.

However, as long as I have mortgage and living expense payments, I cannot put all my cash into investments.

So, how much should I keep?

In this article, I will specifically organize how to decide on a number, such as “how many months of living expenses” to keep.

■ Why do we need to keep cash in the first place?

The biggest reason to keep cash is to protect your livelihood when your income decreases or when sudden expenses arise.

For example, suppose you have to take time off work.

Even if your income decreases, payments for your mortgage, food, and utilities will continue.

What would happen if you had almost no cash at that time?

You might find yourself in a situation where you have to sell the NISA you have been building up over the long term.

And what if stock prices were down at that exact moment…?

I want to avoid that kind of situation as much as possible.

Keeping cash is not about giving up on investing.

Rather, it is a safeguard to continue long-term investing.

■ How do you decide on “how many months” of living expenses?

When you look up emergency funds, you often see the guideline of “3 to 6 months of living expenses.”

The Japan Association for Financial Planners also recommends keeping 3 to 6 months of living expenses as an emergency fund, or even more depending on the situation.

However, a question remains here.

Is 3 months enough for me? Or do I need 6 months or more?

For a household living on 300,000 yen a month, that is 900,000 yen for 3 months and 1.8 million yen for 6 months.

That is a big difference, isn’t it?

I think it is easiest to first calculate based on a 3 to 6-month guideline, and then consider the duration necessary for your own household.

Here are three things you should use to make that judgment.

1. When income decreases, how much will you be short each month?

First, determine the expenses necessary to maintain your lifestyle.

These are things that must be paid even if your income drops, such as mortgage payments, food, utilities, and communication costs.

Let’s assume this is 300,000 yen per month for now.

Next, check what money will still come in if your income decreases.

For example, if one spouse continues to work, there is that income.

If you become unable to work due to illness or injury, you may be able to use company systems or public benefits.

However, benefits are not guaranteed for everyone.

You need to check the eligibility requirements, the amount you can receive, and when the money will actually be deposited.

It is safer not to count on benefits you have not verified.

If your necessary living expenses are 300,000 yen per month and your remaining income is 200,000 yen, you will be short 100,000 yen per month.

Conversely, if your income disappears completely, you will need to pay the full 300,000 yen from your cash savings.

Even for the same household, the amount of cash needed changes depending on the situation you anticipate.

② How many months could that shortfall last?

The next thing to consider is the duration for which you need to prepare.

You should make this decision based on factors such as the following:

✅ Are you a dual-income household, or is there only one source of income?

✅ If you take a leave of absence, can you receive your salary or benefits?

✅ How long is it likely to take to change jobs or find new employment?

✅ Is there a possibility that you won’t be able to return to your previous work style immediately due to childcare or nursing care?

For example, a household where one spouse’s income remains versus a household with only one income source and no clear outlook for re-employment.

Even with the same three months’ worth of cash, the level of peace of mind will be different.

That is why I believe it is important to think about when you might be able to rebuild your household finances if your income decreases.

Do not just assume three months is enough; consider six months or even longer if necessary.

You want to decide by allowing for a little extra leeway, tailored to your family’s situation and job stability.

③ Specifically calculate the necessary cash based on the shortfall amount

Once you have confirmed this, try calculating by assuming a scenario where your income decreases.

【(Monthly necessary living expenses – Money that still comes in when income decreases) × Number of months to prepare for】

For example,

・Necessary living expenses: 300,000 yen per month

・Income remaining if your earnings decrease: 200,000 yen per month

・Duration to prepare for: 6 months

In this case,

(300,000 yen – 200,000 yen) x 6 months = 600,000 yen

On the other hand, if you also consider a scenario where your income disappears completely,

300,000 yen x 6 months = 1,800,000 yen

is the result.

These are hypothetical figures for illustrative purposes.

Also, the calculation result of 600,000 yen does not automatically mean your emergency fund is sufficient.

This is because you also need to prepare for other situations, such as disasters or a decrease in the household’s total income.

First, try thinking about how much you want to prepare for your own household while comparing it to the guideline of 3 to 6 months of living expenses.

And one more thing you don’t want to forget is the timing of when money comes in.

For example, even if you are eligible to receive benefits while on leave, they may not be deposited immediately after you apply.

You want to ensure you have enough cash on hand to pay for necessary living expenses during that time.

■ Households with a mortgage should check one more thing

Something I started to be conscious of after buying a house is housing-related expenses.

In the case of owning a home, money is required beyond just mortgage repayments.

For example,

・Fixed asset taxes

・Insurance premiums such as fire insurance

・Repairs and replacements of housing equipment

・Building maintenance

Furthermore, if you have a variable rate mortgage like I do, you also need to consider changes in the burden due to rising interest rates.

In fact, at the Bank of Japan meeting in September 2026, the policy interest rate was raised to approximately 1.25%.

The impact on mortgage interest rates and repayment burdens is a cause for concern.

However, just because the Bank of Japan’s policy interest rate has risen does not necessarily mean that your own mortgage repayment amount will immediately increase by the same percentage.

Some variable-rate mortgage products employ a mechanism that keeps monthly repayment amounts unchanged for a certain period.

On the other hand, there are also products that do not have such a mechanism.

Therefore, it is important to check your own contract details rather than just looking at the interest rates announced in the news.

Specifically,

✅ What is the current applicable interest rate?

✅ When will the interest rate be reviewed?

✅ When will the monthly repayment amount change?

I would like to confirm these three points.

And for money where the payment timing is known, such as property taxes, you should secure it separately from your preparations for a decrease in income.

■ Think of Cash in Terms of ‘Three Purposes’

Summarizing what we have discussed so far, I think it is easy to understand cash by dividing it into the following three categories.

1. Money to protect your livelihood

This is money to maintain your standard of living in the event that your income decreases or an unexpected situation occurs.

Using 3 to 6 months of living expenses as a guideline, consider the shortfall when income decreases and the time it takes to rebuild your household finances.

2. Money with planned uses

This includes property taxes, insurance premiums, preparations for a child’s school enrollment, and vehicle inspections.

Check your payment schedule for the next year or so and secure the necessary amount.

3. Money to prepare for unexpected expenses

This is a reserve for expenses that are difficult to predict in terms of timing and amount, such as repairs to housing equipment.

Consider this based on the age of your home, the condition of your equipment, and the insurance you have.

What you want to be careful about here is not to double-count the same expenses.

For example, if you have already included property taxes in your living expense calculations, there is no need to add the same amount again in step 2.

■ What happens when you actually calculate it?

Let’s assume the following household as an example.

[Money to protect your livelihood]

Necessary living expenses: 300,000 yen per month

Income remaining during an income decrease: 200,000 yen per month

Preparation period: 6 months

-> Monthly shortfall is 100,000 yen

-> 100,000 yen x 6 months = 600,000 yen

However, this amount assumes only the case where 200,000 yen of income remains.

In a case where income is completely lost, it would be 300,000 yen x 6 months = 1.8 million yen.

Decide on your target amount for emergency savings after considering which of these cases you want to prepare for.

[Money with planned uses]

Taxes, insurance, etc., for the next year: 400,000 yen

-> 400,000 yen

[Preparation for unexpected expenses]

Amount to set aside for home equipment repairs, etc.: 300,000 yen

→ 300,000 yen

If you were to set your emergency fund for living expenses at 1.8 million yen, then:

1.8 million yen + 400,000 yen + 300,000 yen = 2.5 million yen

is the total.

Of course, 2.5 million yen is a calculated amount for a hypothetical household.

It does not apply to every household.

Also, the amount needed for sudden expenses varies depending on the condition of your home, your insurance, and other factors.

The important thing is not to simply copy a general savings amount, but to adapt it to your own household finances.

■ Why I still want to continue NISA

I have talked about cash up to this point, but I want to continue my monthly investments in the S&P 500.

This is because I have high expectations for the long-term growth of U.S. companies, especially those related to AI.

Of course, AI-related stocks can fluctuate wildly, and there are times when the S&P 500 itself declines.

Even so, if you believe in long-term growth, periods when stock prices are falling are also opportunities to buy more for the same amount of money.

Rather than predicting short-term stock prices to buy and sell, I have chosen a policy of investing a fixed amount every month.

Since it is a fixed amount, the money I take out of my household budget each month remains the same, whether stock prices go up or down.

However, even if you expect future growth, it does not guarantee that prices will always rise.

That is precisely why I do not want to invest the cash needed for daily living.

Keeping cash and continuing to invest.

These two are not in conflict, and I believe it is necessary to consider both.

■ Summary | 3 Things to Do This Week

Let’s organize the key points from this article.

✅ Consider 3 to 6 months of living expenses as a baseline for your emergency fund, adjusting based on your family’s situation.

✅ Determine the duration of coverage based on your income sources, public benefits, and outlook for re-employment.

✅ Separate planned expenses like taxes from preparations for unexpected events like home equipment failures.

So, what should you do this week?

STEP 1: Calculate your necessary monthly living expenses

Calculate the amount needed to maintain your lifestyle, such as mortgage payments and food costs.

STEP 2: Simulate a scenario where your income decreases

Think about how much you would be short each month and how long that situation might last. If you are eligible for benefits, check when those payments would arrive.

STEP 3: Compare the necessary cash with your current balance

Add your planned expenses and reserves for unexpected costs to your emergency fund to determine your target cash amount.

Compare that amount with the current balance in your bank account.

If you are short, think about how to increase your reserves.

If you have enough, think about how to use the surplus money.

I believe you should decide whether to review your NISA investment amount only after doing that.

I also want to think about the balance between cash and investments to match my current life now that I have bought a house.

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At SORA, I organize financial topics related to the lives of company employees, such as mortgages and NISA, in an easy-to-understand way while incorporating my own experiences.

If you are someone who says, “I’m curious about the news, but I don’t know what I should do,” I would be very happy if you would follow me and read my next article.

——SORA