You never know what’s around the next corner. That’s why you’re preparing, right? To be as prepared as possible for the unknown and the inevitable? We’ve talked about creating an emergency plan for your family, building a stockpile with a variety of foods, and putting together a bug-out bag, but wait – there’s more!
Another area you need to think about is money. The American economy is as unstable as ever; we’re slowly rebuilding, but so many people have found themselves in financial situations they never anticipated. We need to think about our finances prior to an emergency so that our family is prepared, no matter what situation we find ourselves in. This includes making sure that we have enough cash on hand to provide the basic necessities for our families.
Why Should You Keep Emergency Cash On Hand?
Keeping emergency cash on hand isn’t crazy. Having a supply of cash provides you with a comfort zone and a safety bumper from unforeseen circumstances. Without emergency cash, those unforeseens can make your life difficult and complicated. Simple planning can keep you from shouldering enormous medical debts, financial hardships and other struggles. Cash gives you flexibility to handle situations and negotiate for a better deal.
Maybe you’re thinking, “I can always use my credit or debit card.” But what if there is a major power outage and ATMs are down? What if there’s a massive snow storm and you can’t get to a bank, but the gas station down the street is accepting cash and you need milk for your kids? That’s why you keep cash around the house.
How Much Cash Should I Keep On-Hand?
Your emergency cash needs to be on-hand and liquid, and it needs to be easily and immediately accessible. Ideally, you should keep $500-1000 in small bills in various locations in your home. Much more than that and you carry the risk of losing a significant amount of money in a robbery that will not be covered by an insurance claim. If you prefer access to more cash, keep a smaller amount on-hand and then keep more in a safety deposit box. Some experts also suggest having more cash on-hand if you’re located in a area prone to natural disasters.
It’s still a good idea to have a separate emergency fund at a bank or other financial institution. Best-case-scenario, your emergency fund should be 3-6 months of your salary, but your on-hand cash supply can be significantly less.
That’s a Lot of Money to Save
You’re right. Building a lump sum of cash to keep on-hand can be overwhelming. That’s why it’s important to build this fund like your stockpile, in baby steps. You may not think it possible to build a cash reserve but you can.
Here’s a few ideas to get you started on building your cash reserve:
1. Change: change adds up and may also be very important in a crisis.
2. Give something up: If you have a habit of purchasing 1-2 cups of coffee a day, then give up one cup of coffee. That’s $3 a day you can put into your reserve for every cup you give up and maybe even $15 a week!
3. Add building your cash reserve into your budget: Even if it’s $5 a week, that’s $20 a month in cash you’ll have on hand if you set it aside faithfully.
You Had to Use Your Emergency Cash? What now?
If you’ve had to dip into your emergency cash for whatever reason, you need to focus on getting it rebuilt as soon as possible. Having a cash emergency fund is important for protecting your family as well as maintaining your financial stability. I know its hard to think about setting aside cash to “not use.” You have to view this stash as an investment in your family.