FEMA has designated April as National Financial Capability Month. There are so many elements as layers to financial capability and preparedness; there is no way to cover it all in one article (that’s why they probably designated a whole month, huh). As such, I’m not going to try to water it all down or write a 300-page article this week. I do have plans to tackle some specific issues around financial preparedness in the future, but today I want to talk about cash.
While I’m going to talk about finances in this article, it is important to remember that everyone’s finances are different and unique to their situation. Allocating financial resources may be more or less difficult in your position. Since finances are a sensitive issue, it is important to remember my goals for every article I write:
- Make you aware of the topic
- Help you understand why that topic is important to you, your family, and your community
- Provide you with a first step if the topic inspires you to act
Preparedness is a Journey. Everyone is at different points along that journey. Just because you’re not “fully prepped” especially financially, don’t worry or be discouraged…especially because there is no such thing as being “fully prepped.”
Ok, so why are we tackling cash today? I’ll give you two reasons:
- Having cash on hand is arguably the first, easiest, and most straightforward step in financial preparedness.
- I forgot my wallet on the way to the grocery store last week. (yes, this will be relevant).
Why Should I Have Cash?
Cash is king in an emergency. Technology over the last several decades has allowed us to utilize our financial resources without actually needing to have those resources on hand. We can use credit cards, checks, websites and now our phones to transact almost anytime, and almost anywhere, for almost anything.
The problem comes when the services that allow these tools to function are not available. Without electricity, you can’t use a credit card or website. Without cellular service, Apple Pay and Google Wallet are restricted if not completely useless. Without a phone line, no store can verify funds for a check. In almost every natural disaster these systems are damaged, and therefore you cannot buy anything. However, if you have cash on hand, you will be able to purchase supplies because it is actual currency.
*Note: This is assuming the rest of the country and Globe are unaffected by the disaster and financial systems and markets are still running outside of your immediate area. This means you will still have access to all of your financial resources once you have been evacuated or services have been restored. If that is not the case, then we need to have a larger talk about bartering…but that’s another article.
Where Should I Keep Cash?
Just as with all of the tools in your “Preparedness Toolbox” this becomes a question of what do you think you’ll need in a specific situation. Ideally, at a minimum, I recommend having some cash at your house, in your car, and in your EDC gear. This ensures that you have some level of financial capability, where ever you are if a disaster happens.
For each of those three locations, you may want to utilize multiple storage areas. Here are some examples:
You might want to store a large amount in a safe (ideally with some level of fire and water-resistance) and then spread small amounts through the house. Placing it in rooms on different floors, possibly in the garage, and maybe even burying some in the backyard. Yes, I know, burying cash in the backyard sounds a little “tin foil hat”-ish for this blog. However, if you are prepping for an earthquake, it is possible that your house may collapse and the storage places you selected would not be accessible. Creating a place to store cash outside would give you at least some resources until you could access your other hiding places.
The usual plan with cars is to store some inside the vehicle, like the console or glovebox, and some outside of the vehicle cabin, like in the trunk or a trailer hitch safe.
So I know, that “your wallet” is the obvious answer. However, in an emergency, you may have to get rid of your wallet for safety reasons, or you may not be where you set your wallet down (like in a desk drawer). As such, I recommend that you select at least one other location to keep money on your person. It could be a pants pocket, a jacket pocket, your briefcase or bag, or even inside your shoe. Just make sure you’re not solely dependent on your wallet.
How Much Should I Have?
This is a huge variable with no real right answer. This is also one of the areas where you may feel the limitations of your current financial situation. If that is the case, start with an amount that you are comfortable with and plan to grow and expand it over time.
You’ll hear a lot of financial planners talk about a “3-month emergency fund” or a “6-month emergency fund”…this is a different emergency fund. It can be part of those larger “emergency funds,” which goes to the idea of layering our preps. Since this cash is specifically designated for an emergency, I took a portion of our “emergency fund” to create the cash caches in our preparedness plan.
I recommend sizing the amount of cash at each location based on what you think you’ll realistically need and how secure you can keep it. No one wants to walk around with a ton of cash falling out of their wallet while they walk down the street. Remember, these ranges are my recommendations, but you need to think through what you think is reasonable and what you would need. Also, you’ll want a mix of denominations, heavy in the $1’s, $5’s, and $10’s as it may be difficult to receive change during a transaction.
This is a fairly minimal amount. The main purpose would be to purchase food or water while walking to my next location ($20-$50)
This is slightly larger than my EDC because I want to be able to purchase at least one full tank of gas. Additionally, I may need to buy some supplies during the drive, or pay for some help ($30-$100)
This is where you’ll have the largest amount of cash, along with the most security. Make sure you have some method for locking up and protecting your cash. Don’t show anyone outside of your trusted circle where it is or how much you have. I’m not going to put a recommended amount because when it comes to homes, there are too many variables. However, think about how much you would want available to buy supplies, or rent a hotel room once you’re evacuated. Do you need to make a rent or mortgage payment with the benefit of electronic payment? When you’ve been evacuated, it may take a while to get replacement cards, if they were damaged in the event. How much would you need to sustain yourself and your family for three days to a week while you wait for replacement credit cards?
An earthquake isn’t going to happen everyday…at least we hope not. However, you know what does seem to happen frequently to me. I forgot my wallet at home when I go to the grocery store. Last week was embarrassingly about the 300th time I went to the grocery store, got to the check out line, watched the checker scan all of my items, and then realized that my wallet was not in my pocket…or my other pocket…or that pocket either.
Luckily, I just configured Apple Pay on my phone, so I thought I was saved…nope. The card reader wouldn’t recognize my phone and wouldn’t process the purchase. As I walked out to my car, preparing to drive home to get my wallet and drive back, I remembered that I had emergency cash in my car (I told you I’d make forgetting my wallet relevant). I was able to purchase my groceries and save myself some of the embarrassment associated with the situation.
Being prepared for the big emergencies will also help you be prepared for the small, everyday emergencies too. As long as there is a functioning financial system somewhere, cash will have value. Immediate access to that value can make the difference in emergencies, both big and small.