Digital payment platforms such as Venmo, PayPal and CashApp have changed the way we use and keep physical cash on hand. Most people rarely carry cash, let alone at home. However, there are always unexpected events that can lead to the need to have some cash on hand, especially emergencies ranging from catastrophic weather (hurricanes, wildfires) to power outages. If you don’t have access to your digital currency or if your banking systems aren’t working, cash can make it easy for you to get gas, food and medicine.
Keep cash to a minimum
From a security perspective, cash is the most insecure asset you can have. Keeping it to a minimum in the event of a fire or theft is a good rule of thumb, says Ryan McCarty, CFP of McCarty Money Matters.
How minimum is up for debate among financial experts. Danielle Miura, CFP, the founder and owner of Spark Financials, suggested, “You should have enough cash on hand to get a few gallons of gas, pay a tip, or help out in unfortunate events,” or about $ 100 – $200 at a time. “Emergency money should not be kept in your home, they should be kept in a high-yield savings account of your choice.”
McCarty put it more in terms of a ratio: “In terms of amount, don’t let your money exceed 10% of your total emergency fund and/or $10,000. You can’t deposit more than $10,000 in cash in any given year without raising red
Enough for emergency costs
Yasmin Purnell, a personal finance expert and founder of The Wallet Moth, a financial website, suggested keeping plenty of cash on hand in case of an emergency that would require you to have access to “temporary lodging, food and drink, petrol and medicines’. Purnell added, “As a general rule of thumb, having access to $1,000 in cash at home would ensure that you can at least afford the immediate costs in the event of a national emergency.”
Ted Capwell, an investment manager and co-founder of Safe Trade Binary Options, a financial news website, suggests that instead of holding cash for emergencies like this, you could hold staples. “For example, instead of keeping $500 for food, buy frozen foods and keep them in a refrigerator. Or buy an emergency kit instead of keeping money for hospital bills.”
Less than $1,000
Jesse Cramer, founder of The Best Interest and relationship manager at Cobblestone Capital Advisors, believes less than $1,000 is ideal.
“It varies from person to person, but less than $1000 is almost always preferable. There just isn’t enough good reason to leave large amounts of liquid cash lying around the house. Banks are infinitely safer.”
To bring this point home, he told his parents’ neighbors were badly burned in a house fire as they tried to find their hidden stash of cash.
“This is an extreme example, but the point is,” Cramer said. “In today’s world of ubiquitous credit cards, Apple Pay, Paypal, Venmo, etc., there aren’t enough good reasons to keep large amounts of cash in the house.”
Keep your money safe
No matter how much cash you keep at home, you want to keep it safe, says Matthew Dailly, president of Tiger Financial. “For starters, you need to find safe havens for it… The loss of a large amount of money can happen in seconds if your home is damaged by a flood or fire. Fireproof safe storage is therefore a good idea. Plus, you act as a lure for potential burglars… Even if you buy a high-tech safe, a criminal could still try to break into your home.”
For security reasons, this money should be kept in a locked safe, along with other valuables in the house, McCarty said. “Make sure the safe is fireproof and watertight to prevent damage. Make sure to deposit and replace the money every now and then so that the accounts don’t get too old.”
Jay Zigmont, PhD, CFP®, founder of Childfree Wealth, a Mississippi-based life and financial planning company, offers another caveat: “Having money on hand naturally comes with the threat of theft or loss, but the is also can be a challenge for you not to spend it I’ve heard of people freezing the money – literally – to slow them down, give their partner or child the key to the safe or other things to slow themselves down Find a balance that works for you.”
Do not panic
When things go bad, people tend to panic, and taking out a lot of money to protect against emergencies can even work against you. Contrary to popular belief, you’re already protected from a bank failure, Dailly said.
If a bank fails, the standard FDIC insurance policy is $250,000 per depositor, per insured bank, for each account. “To avoid a total collapse of the entire financial system in one fell swoop, you can simply divide your fortune among several banks.”
Cash loses value
A good rule of thumb is to keep as little as you think is necessary; although it may seem strange, cash loses value over time. “Unlike money in circulation, which loses value over time, money in a bank keeps its value and sometimes even increases in value. A secure financial institution is the only way to ensure the safety of your money,” said Dailly.
/cloudfront-us-east-1.images.arcpublishing.com/gray/IVFNNZRL6ZEC7IWMYQCO3VZ6W4.jpg)
