As the once-unmentionable prospect of Greece leaving the Euro becomes more frequently acknowledged as a possibility by mainstream media, Greeks have been falling all over themselves to withdrawal their euro-denominated savings out of Greek banks in order to have their savings in on-hand euros, as opposed to a new currency which would presumably be the drachma and of possibly substantially less value than the euro. The likelihood of a bank holiday where the banks convert all of their euro holdings to a new currency is high and the Greek citizens sleep a little more comfortably on euro-stuffed mattresses than knowing that their savings could lose a lot of value (I’ve heard estimates of 30%-70% if Greece leaves the Euro) left in the banks. No one knows for sure what will happen in Greece and right now average citizens are trying to play it safe and preserve what they have. This is a good case for investing some of your money into precious metals, by the way.
Watching this unfold in Greece made me think about the idea of keeping some cash on hand as part of preparedness. We have had bank runs in our past as well as recent brushings with bank failures – there’s nothing that says that this can’t happen here. The FDIC insures deposits up to $200,000 but they’re not in the business of making sure it gets to you in a timely fashion. The possibility of some sort of glitch in the banking system is definitely within the realm of possibility. Should something like that happen, one of the last places I would want to be is standing in lines while ATM’s and banks get depleted and/or having to scour town for an untapped ATM machine. Hell, even if everything goes fine but the power goes out and you can’t pay for things with credit cards or use ATMs, you’ll be well served to have some cash squirreled away at home.
At a more mundane level, it’s good to have some small bills around to be able to take advantage of certain deals where cash is still involved in our increasingly-cashless society. For instance, there’s some kids down the block that come around looking to mow or shovel snow for a few dollars. They do not accept Visa, Mastercard or Paypal. It’s nice to know that I can go grab a $10 from the stash and pay them. There’s been times I’ve needed to get a haircut and didn’t have cash around so I either had to drive out of my way to get to one of my bank’s ATMs or pay a fee at a more convenient one if I was pressed for time (which I often am). With some bills stashed away, I know I can just grab one of those if I don’t have enough day-to-day cash on me. I also like to keep at least one $10 bill in my truck, which has come in handy a few times.
The issue of whether or not it’s safe to keep cash in your home is a valid one but then again, as we’re beginning to see in Greece and we’ve seen in Argentina, sometimes money in banks is just as vulnerable. By keeping some cash around you’re covering all of your bases. You have to use some discretion when keeping cash around the house. I wouldn’t keep that much around and what I do I would not but in the same spot or the most obvious spot. There’s probably all kinds of places around your house you can stash a few things and reduce the likelihood of an intruder finding them. One thing I’ve seen that looks kind of cool are these safes:
Completely inconspicuous if placed among other similar items – most criminals aren’t going to go through your cleaning supplies. Use your imagination.
As far as how much you should keep around, that’s up to you and varies from person to person, but I would keep in mind that you might someday have to sustain yourself for several days or even a week or more on your own cash, should there be some sort of interruption in power, economic collapse or whatever.
As far as denominations go, I like smaller bills. They give you a little more flexibility. In the event of the electronic banking system going down there might be some issues making change and being able to pay an exact amount gives you a little more leverage in bargaining, i.e. if someone wants $75 for something and you’re rebutting with $60, your offer is a little less firm when you offer a $100 expecting $40 in change. Plus many of our day-to-day expenses are small and you don’t want to end up like this guy:
If I had no cash on hand and was going to start with $100, I think I would choose three $20s, three $10s, a $5 and five $1s. With my next $100, I’d take a $50, a $20, a $10, three $5’s and five $1’s. After that it’s up to you. I feel this combination would offer me the most denominational flexibility for most common transactions that would tide us over for a week or so should we need it.
As Dave Ramsey says, “cash is king”. Don’t overlook this aspect of your preparedness.