Sunday, June 19, 2011
Why must you set aside emergency cash?
By “emergency cash” I mean at least $2,000. The first problem is that less than five percent of U.S. families have at least $2,000 cash on hand in the first place. In fact, half of the families could not even come up with the cash within 30 days. So says the Dayton Daily News:
In a pinch, half of U.S. families can’t find $2,000
[Dayton, OH, June 11, 2011] Half of American families — including a growing portion of the country’s middle-class — would not be able to cope with an unexpected expense that required them to come up with $2,000 within 30 days according to a study that illustrates both the fragile nature of family finances and the depth of the nation’s financial crisis …
Actually, even those who say they can come up with $2,000 in 30 days are assuming the banks will be open. They will not be open in a flood, an earthquake, or an attack on the banking system.
Further, what if a problem comes up on a trip? Emergency cash will not help you if you’ve left it at home. Here’s a classic example—a few details have been changed but the facts are true:
Our good friends Jim and Grace Weston, both in their 70s, left Wells, Nevada in their 1999 Range Rover last March 20th. They were en route to attend their son-in-law’s funeral in Las Vegas. Early that evening, the transmission started making odd sounds. They barely made it to a gas station in a small town when the transmission gave up.
“We called AAA,” said Jim, “and a tow truck driver showed up, but he was shorthanded and therefore unable to tow us back home, or on to Las Vegas. I then tried to call a car rental agency in the next town. They were closed, so I tried the one taxi company there. They wanted $180 to come pick us up and then take us on to Las Vegas but said it had to be cash only, no credit card.”
Although Jim had two credit cards in his wallet, he had only $52 in cash. His wife had $33 and some small change—far from the $180 they needed. (In desperation, they contacted members of their religion who were willing to help, but how many travelers are able to do that?)
Back to the subject of keeping some emergency cash. If you haven’t got it, get it. (I tell you how to obtain it in my e-book “How to Survive.”