Dear Liz: In these uncertain times, I decided I need to have cash on hand. I withdrew $500 in small bills from the bank and put it in a fireproof pouch. Is there a recommended amount of cash one should have available for emergencies?
Answer: The appropriate amount depends on how much you spend and how paranoid you are.
Many financial planners recommend storing a few hundred dollars somewhere safe in your home in case a widespread electrical outage — after an earthquake, for instance — affects ATMs and point-of-sale devices. The idea is that you’ll want enough cash to cover spending for a few days until the power comes back on. Smaller denominations are better than larger ones because you may have trouble finding anyone to give change for $50 or $100 bills.
Emergency preparedness sites tend to recommend storing even larger amounts — $1,000 to $3,000, or whatever you would need — in case access to ATMs and credit cards was affected for a few weeks.
Obviously, storing cash has its perils. The money could be lost, stolen or destroyed in a disaster. You’ll have to weigh those risks against the possibility of needing the cash, and make your own call.