Last Updated on: September 20, 2023
Key Takeaways:
- A cash stash is a portion of your emergency fund that you’ll keep at home if you need immediate access to cash.
- The stash is ideally one month’s worth of your emergency fund, but you can also save your starter emergency fund (P10,000) if you think one month is too much.
- Save your stash in a secure place at home, preferably in a fire-proof safety vault.
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An important element of personal finance is an emergency fund, which can be three, six, or even twelve months of your monthly expenses.
It also needs to be highly liquid so you can easily access the money for emergency expenses, like natural disasters, immediate repairs, health-related costs, and more.
However, a less commonly mentioned topic is where you’ll need to place your emergency fund. Should you leave it all in a traditional or digital bank to earn interest or hide some at home?
Cash Stash in a World of Digital Money
We now live in a digital world, and having digital wallets makes it convenient to transact, transfer, pay, and save money.
Almost every bank today also has some form of digitalization, making it important to have online banking accounts.
However, having a cash stash at home is still important for easy access because you’ll never really know when you’ll need it, and it would be ironic if you can’t access your emergency fund during an emergency.
Why You Need a Cash Stash at Home
During the early onslaught of the COVID-19 pandemic and the first lockdown, there had been a huge panic regarding access to our basic needs, especially food and other essential items.
I think most of us felt that it would only take a couple of weeks of isolation before the pandemic stops and we’ll immediately return to normal.
This also prompted us to fall in long lines at our banks to get cash to pay for supplies, only exposing many more to the virus and inconveniences.
Eventually, the bank’s cash supply dwindled, and many could not withdraw. It is good that online payment services, like GCash and Maya, were eventually accepted by local stores.
Here are some instances when you’ll realize it’s better always to have cash at home.
1. Natural Calamities Will Happen
For some places, natural calamities like typhoons, floods, or earthquakes are more common, making access to your money at the bank difficult, especially when the power is cut off.
For instance, we live in the Bicol region, where strong typhoons are normal and almost expected. So when storms happen, strong winds can destroy houses and topple electric lines, and rain can cause floods.
During this time, electricity can be cut off until the typhoon is finally out, and the clearing operations can start, which can last for almost a week. If this happens, you’ll have no access to your money until banks resume their operations.
So, if you have a cash stash at home, it will be more convenient for you and your family to buy food, water, and other necessities using cash.
2. When You Live Far From Banks
Banks are relatively accessible if you live in urban areas or the cities. However, this is not the case if you live in the provinces, where banks can be tens of kilometers away.
So, if you need quick cash for an emergency, driving or commuting to the banks would be time-consuming to withdraw money. In this case, it would make sense to always have a cash stash at home that you can easily get.
3. Bank Maintenance
As a rule, never park all your money in one bank because the PDIC can only insure P500,000. So, it would be better to also save some on other banks.
Personally, I have money in two digital banks and one traditional bank. I love saving using a digital bank for its high-interest rate, while I use the traditional bank as a conduit to get my money in and out with little to no fees,
Unfortunately, if those banks happen to go offline at the same time, or your conduit bank goes into maintenance, then it will be difficult to get your money out in case of emergencies. This is where your cash stash will get handy.
What are the Risks of Keeping Cash at Home?
While having cash at home has its perks, risks are also involved. However, keep in mind that the purpose of having a cash stash at home is for emergencies.
So, what are the risks of keeping a cash stash at home?
1. Stolen Cash
Of course, since there is money possibly lying around in the house, it tends to get stolen. However, if you place your cash stash at a secured location, it is almost unlikely to be stolen.
I think the bigger problem is if you spend your emergency fund cash stash at home on non-emergency items.
2. It won’t earn any interest and even lose value due to inflation.
Money in your house will never earn interest and will also lose its value due to inflation. However, since the purpose of your cash stash is for an emergency, not earning any interest is not a concern.
3. The cash can deteriorate or get outdated.
The Philippines had a massive change in our money, specifically with banknotes and coins.
Because of these changes in the design, the old money you may have stored at home may lose its value eventually and become just worthless pieces of paper or metals under your bed.
So, it is still your responsibility to replace the money in your cash stash if there are some re-designs in the current bills and coins.
How Much Cash Should You Keep At Home At All Times?
A nice rule of thumb to follow for how much cash stash to keep at home is one month of your monthly expenses.
For instance, if your monthly expense is P20,000, keeping that amount safely stored at home would be helpful.
But if you think this is too much, you can look at the starter emergency fund we discussed in the 7 Baby Steps article, which is P10,000.
Where Should You Keep Your Money at Home?
Since we’re talking about tens of thousands of pesos, keeping that emergency cash stash safe is important.
A good place to start is in a locked drawer. But if you have the capacity, a safety vault is a great place to put your cash stash.
A safety vault is often fire-proof, so aside from your cash stash, you can also put your important paper documents, like birth certificates, house and lot titles, and others.
Final Thought:
Your cash stash at home is not a substitute for banks and other investments. It is only an added protection, so you will always have some emergency funds at home.
It is also crucial that your significant other has access to this cash stash in case you’re not home.
