Should You Keep a Stash of Cash?

You may know people who’ve squirreled away cash in their underwear drawer, under their mattress, or in between the bag of peas and pound of hamburger in the freezer. In fact, even in a time of electronic funds, a GOBankingRates survey found that an astonishing 70% of Americans keep a stash of cash at home. Perhaps you’re one of them.

Why should you keep cash around?

People’s justifications for having cash on hand run the gamut – from a mistrust of financial institutions to buying Girl Scout cookies from the neighborhood kid. Others simply prefer cash to cards or cash apps. While it’s safer to keep most of your money in the bank or other financial institution , there are some very important reasons for having some cash close at hand.

If a natural disaster or other emergency results in a power outage, local businesses may only be able to accept cash; however, getting your hands on that cash may be impossible because banks, along with their ATMs, may also be forced to close. Having some cash in the cookie jar will come in handy to purchase food, toilet paper, gas, medications, temporary accommodations, and other necessities during these unexpected catastrophes.

You may also have to fork out dollars if you lose your credit card and are waiting for a new one to be issued, as few retailers accept checks anymore. Some small vendors and businesses don’t take credit cards, or they may charge a fee or request a minimum spend. You may want to have cash available for tips, too.

How much cash should you stash?

There’s no magic number for how much money to keep on hand. Some financial experts believe a few hundred dollars is plenty, while others advise setting aside a few thousand in a safe place.

According to Elliot Pepper, CPA, CFP, MST, financial planner and co-founder of Maryland-based Northbrook Financial, “A cash amount enough to cover the absolute bare necessities for two months might be a reasonable basis.”

On the other end of the spectrum, Jesse Cramer, associate relationship manager at Cobblestone Capital Advisors, says that less than $1,000 is a more appropriate amount to keep in your home, as cash is the most insecure asset you can have.

It’s also recommended that your stash of cash be in lower denomination bills , especially ones and fives, in case some stores don’t have change in emergency situations. Rolls of quarters may also come in handy for making change or even bartering with vendors.

Where should you keep your stash of cash?

While everyone agrees that you should have paper money at your disposal, stuffing it in a sock or beneath a loose floorboard in your home makes it vulnerable to fire, flood, and burglary. After you’re gone, those ingenious hiding places, like tucked between the pages of a book or buried in a potted plant, can even result in your hard-earned money getting tossed out or pocketed by someone who has no right to it. Your nest egg could even be left behind for the new owner of your house. You can cancel and replace a credit card, but if that stack of greenbacks is lost, it’s gone for good.

If you live in a senior living community, a safe is also a good option; however, if you simply want to keep a small amount of cash on hand, a locked drawer in a desk or file cabinet may be sufficient. Do not leave cash lying around because of the number of people who have access to your personal space.

Many communities also offer resident trust funds to keep your money safe and allow you easy access to it, but these funds can be vulnerable to misuse by an unethical employee. Plus, any amount over $50 must be placed in an interest-bearing account; therefore, in the case of an emergency, you may not be able to get your hands on your cash.

“Things have a way of disappearing from the home, especially when you have existing family drama or a dispute,” says Alvina Lo, chief wealth strategist at Wilmington Trust , a subsidiary of M&T Bank. “It’s very unclear from a property rights perspective who it belongs to.”

Instead of playing hide and seek with those bills (and potentially not being able to locate them!), purchase a bolted-down, fireproof and waterproof safe and store your emergency funds there (make sure your power of attorney or someone you trust also knows the combination or has a key). And if you’re not using the cash, occasionally deposit and replace the bills , as some businesses will not accept older currency because it’s easier to counterfeit or if it’s worn out.

Your reserve of emergency cash shouldn’t all be stored in your home. Keep a modest amount of cash in your wallet as well as safely tucked away somewhere in your car if you drive (remember that time you forgot your wallet and had to drive back home?!). That way, you can put your hands on cash whenever you need it.

Wherever you choose to store your cash, keep an updated record of the amount and where it’s located. And make your power of attorney or another trusted person aware of this information.

While using paper currency these days feels about as antiquated as driving a horse and buggy, it’s still the easiest, most reliable and least expensive way to pay for things. Keep some cash available – but keep it safe – and you’ll be prepared for just about anything!

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