Recently she has been selling off unneeded stuff. Twice in the last couple weeks I have gone to deliver something and needed to run them to the ATM to get cash to pay me. Not a big deal really. Lots of folks here don't have cars and we can all forget something. The more interesting part is that we aren't talking about a lot of money. One time it was $40 and another it was $60. One of the gal's had no cash and the other was $20 short. I sort of shrugged the first one off but the second showed it is a noteable trend.
This was a stark reminder that there are lots of folks out there who have what amounts to no cash (probably a few crumpled ones and a bit of change) on hand. Folks who would be unable to pay for gas or food (I'd bet a c note the cupboards are almost empty too) if the electricity and ATM/ computer networks were down. Part of a day would be an inconvenience but if there was a power outage/ regional disaster these folks would be screwed.
If you do not keep some cash on hand you are a fool. Despite what the 'tangible investment' and beans and bullets folks say in all of the more realistic and likely scenarios people still deal in cash. You don't see complex systems of barter appear overnight in anything but a total collapse. Maybe a good bargain can be made for gas, shotgun shells or canned food but folks will accept good old greenbacks. As for how much you should keep around I am a lot more flexible. Different people have different needs and concerns as well as incomes, assets and tolerances for specific types of risk. I think establishing the minimum is significantly more important than setting a maximum.
Chief Instructor says that a month's worth of cash expenses kept on hand is a good number. Cash expenses would be stuff you need that is not locked into a regular contract. They are also things that if, and I am just tossing some stuff out here, ATM's crashed or banks went on a holiday, there was a power outage or whatever you would still need to pay for regularly in cash on the barrelhead for. Food and fuel are primary considerations here with stuff like medication, smokes, booze, vehicle maintenance, etc in there also. If you have drank the coolaid and are following Dave Ramsays baby steps just keeping baby step 1 ($1,000 in savings, $500 if you are real low income or 2k if you have a high income) in mixed bills at home. However you choose to figure it the end result is pretty much the same. The point is to have enough cash to get yourself through some sort of emergency or otherwise sustain yourself for awhile.
These low numbers should be fairly easy to meet with a bit of planning assuming you live a sane financial lifestyle. They aren't enough money that inflation is a significant issue but are enough to deal with most of what could come up. Also these minumum amounts are low enough that if your stash happens to get found it shouldn't break you. Though as Commander Zero noted once it is far more likely that your stash will be frittered away by you on a pizza here and a $20 for a trip to the bar there then actually get stolen.
As for the maximum. It is really about what you are willing to risk being lost in a fire or by theft. I wouldn't want so much cash in my home that I couldn't afford to lose it should something happen. A certain percentage of your overall liquid assets is probably the way to figure it out. For me 10% seems reasonable and 20% doesn't seem nuts. That means if you have 10 grand in various stuff 1 or 2k in cash. If you have 100k it would be 10 to twenty. Unless you live a particularly high risk lifestyle where you might need running money I would not want to go much higher than that. Baring the potential sudden need to get out of town for a few months I would not want more than then at risk of theft and getting eaten away by inflation.
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Check your insurance policies carefully. Many homeowner's and renter's policies only cover a few hundred bucks in cash or coins.
That means that you either need to be prepared to lose anything you keep at home in the most common disaster you could have (residential fire) or you need to pay your insurance company more for a rider to protect extra cash.
Additionally, you are incurring inflation risk by literally stuffing your mattress with cash. Even with "normal" 1-3% inflation, over time, the buying power of that money is significantly degraded.
We keep some cash at home, but I think that 10-20% of total liquid assets may be too much. I would look at your expected disaster then sock away accordingly.
For example, if your expected disaster is a hurricane, then I would have sufficient funds on hand to LEAVE ($0.55 per mile per car you plan on driving to get to safety, and enough for bus tickets just to be safe), stay in hotels/eat on the road (~$50-100 per day on the road per person "per diem"), and maybe a few hundred bucks to buy plywood and last minute tools at the hardware store before leaving.
"If you do not keep some cash on hand you are a fool."
Hey, now. The P.C. term is "differently wisdomed."
I had an incident recently while returning a rental car. I went to top off the gas tank and the gas station was experiencing technical difficulties. No card readers were functioning. Fortunately for me, I had cash (enough, but this served as a reminder.). It was impacting sales because other buyers had to leave and go elsewhere. What if there was a glitch that was not just localized to the one station? Hmmm.
Another time, after an ice storm, I was driving through a blacked out section of town. An army/navy store was the only place open because they had a generator. I walked in to "observe" and see what was moving off the shelves. No credit/debit cards were accepted as that system was down for the count. Folks were upset, but they did realize that it was beyond the store's control. No prices were increased at the last second. It only took 3 days for the power to be restored, and the surrounding area wasn't affected as severely. It certainly drove a lesson home.
My wife and I are just beginning the "Ramseyesque" journey of debt removal, and I am finding the envelope system to be a K.I.S.S. system. Now I leave one in the car for gas money.
I live in hurricane country now, but I'm glad I haven't had to deal with long term power outages.
I think a 1 month reserve if FAR too low, better than nothing but bearing Katrina emergencies in mind, the price of certain items can skyrocket over night. I remember hearing stories of $10 - $15 dollar gasoline on IH 45 hurricane evac fiasco. Sure, you can sue later on for price gouging, but at the moment, wouldn't having that reserve get you out of the situation quicker?
Interest rates right now are in the crapper, hard goods likely appreciate quicker in price than the 1 - 2% rate you are getting paid by bank to use your money.
Chris makes a good point about checking policy
I keep a few thousand cash at home in a fireproof container, along with passports and important documents like that. Yes, I know it's loosing value due to not getting an awesome 1.3% in my ING account, but I'm willing to take the hit to have guaranteed access.
My thinking is that if TSHTF and I'm bugging out, it's better to be able to pay $50 per gallon of gas that to be stuck. My guess is that before most realize what a total collapse means, they'll take bunches of worthless cash for stuff I might need. If it's not really a collapse I'll feel a little bit stupid after things are right, but if it is a collapse...
And it's one of those "preps" that is good for any disaster from total collapse to weekend w/o power. It isn't rocket surgery; keep at least a few hundred on hand, more is better.
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