Buzz
In many places today, cash isn't the dominant form of payment. While it’s still possible to live entirely with cash, very few people choose that lifestyle. Many of us don’t carry cash at all, opting instead for digital transactions via our phones and credit cards, tapping or swiping in stores and using services like Venmo or Cash App for personal payments that were once made with physical cash.
When we discuss the importance of an emergency fund, we're usually referring to money in a bank account rather than cash hidden away somewhere. Money in a bank accrues interest, is protected against theft, and is accessible no matter where you are.
However, cash still holds value. In fact, during emergencies, having cash on hand can be essential. That’s why it’s wise to keep a reasonable amount of cash at home. But how much should you really have?
Cash is essential in many situations, and it’s still worth keeping some on hand despite the digital age. While most daily transactions can be completed without cash, having bills in a safe or hidden spot might seem outdated. However, there are key reasons to store cash at home.
In today’s world, we don’t usually rely on cash for most transactions, so having a stash of bills in a safe may feel unnecessary. But there are valid reasons for keeping some cash tucked away, especially during emergencies.
It could be crucial during a power outage. Natural disasters, such as hurricanes, often knock out power for extended periods. After Hurricane Sandy in 2012, some areas were without power for almost two weeks. Puerto Rico continues to struggle to restore power after multiple storms. Power outages make it hard to charge devices, and they can disrupt digital payment systems and even data networks. In such times, cash will be invaluable for making purchases.
Cash remains widely accepted. Even if you’re able to power your phone and stay connected, you might find yourself in situations where others aren’t using the same payment apps. For example, you can’t Venmo someone if they don’t have an account. During an emergency, people won’t have the patience to set up new payment apps, so physical cash becomes essential.
How much cash should you keep on hand?
It’s wise to keep some cash available, but don’t overdo it. Your emergency savings should cover a few months of basic expenses. As for cash, it’s best to have enough to cover a week’s worth of essential expenses, such as gas, groceries, prescriptions, and possibly emergency housing, like a hotel or motel room, for a night or two.
The amount of money you'll need for these essentials will depend on your family's size and specific needs. However, a typical range is between $500 and $1,000 to cover a temporary emergency. Even as little as $200 can be useful in such situations, but anything beyond that might be excessive. It's often wiser to keep extra funds in a bank where they will be safe, insured, and earn interest.
To estimate a more accurate amount, start by listing a week's worth of expenses, including food, bottled water, medications, and other necessities for your family. Add the cost of a night in a nearby hotel, then round up to the nearest $100. This figure will give you a reliable estimate of how much cash you should have on hand.
A few important things to remember about your emergency cash stash:
Inflation. The $500 you set aside today will likely lose its purchasing power over time. It's smart to periodically review your emergency fund to ensure it remains sufficient for your needs.
Degradation. Paper money deteriorates with age and frequent handling. Even cash stored at home can become damaged. Keep your emergency cash in a safe, dry place, and consider replacing it with fresh bills every few years.
Don't use it. Having cash on hand might tempt you to dip into it for small expenses like tips, paying off minor debts, or purchases you’d normally make with a card. But when an actual emergency strikes, you’ll realize it’s gone—and that’s exactly when you’ll need it most.
