Cash on Hand

I went to my brother
To see what he could do
He said, brother like to help you
But I'm unable to
--Simply Red

One personal finance decision is how much physical cash to keep on hand--i.e., under the pillow, in a coffee can in the backyard, between pages on the bookshelf--for 'just in case' situations. If one focuses on the central bank money printing situation, then the answer is not much. As we move closer to Big Inflation, then the value of paper dollars kept at the house goes to dust quickly.

However, the recent hurricanes offer a reason why it still makes sense to keep some cash around. Power could go off, thereby reducing electronic access to money. Those with cash in hand can make vital purchases that others cannot.

Bank runs, like those in Greece and Cyprus, are another reason. Cash withdrawals could be limited, once again granting only those with physical cash on hand with financial flexibility.

Bottom line: Despite the inflationary environment that destroys the purchasing power of currency, keeping some cash on the premises seems prudent to manage risk associated with extreme events.