Unless you’re sitting in a movie, chances of an overwhelming emergency (think invasion by aliens) are not very likely. But in the natural course of things , emergencies do occur, including earthquakes, hurricanes, floods, blizzards, windstorms, fires and landslides. On a more personal level, the theft of credit or debit cards, checks and other items that you routinely use to make your way financially can be a temporary emergency that deprives you of your usual ability to pay for purchases, cover usual expenses, etc.
Financial experts take the position that emergencies, large or small, are almost certain and they advise that you be prepared to see yourself through a temporary dry spell. The question is, how much to stash for an emergency and where to put it so it is accessible when you need it without being a target for thieves. The “how much” element is tricky. There is no set amount and the individual ability to tuck money away against future need varies greatly. Some say $500 minimum. Others set three to six months of usual income as the goal. Some see a “conservative” $10,000 as requisite. In the final analysis, you have to assess your ability and do what feels right for you. But you must make it a priority not to be taken lightly and then treat your emergency fund as inviolable. Don’t let little emergencies rob you of what you would need in a real emergency. Treat the emergency fund as you do insurance: Be sure it’s available, then hope you never have to draw on it.
Just be aware that in a real emergency, there is likely to be no power (no ATMs, no self-serve gasoline pumps, etc.) and financial institutions are likely to be unavailable. Your credit and debit cards are probably going to be useless. That makes cash the preferred mode of preparing for an emergency.
Financial guru Dave Ramsey advises starting small. Set a goal, for instance, to save $3,000 in a year. That amounts to $250 per month. Spread it over 18 months and the monthly set-aside is $166. Rule of thumb: It probably will be at least a week after a serious emergency before things return to normal for your finances. Plan on at least that long. If you already have savings accounts, consider taking out enough to finance your emergency fund. It is possible to invest the emergency funds, but don’t put them in accounts that can’t be accessed almost immediately. The money should be liquid and available. If for some reason, your emergency fund is depleted (say in an actual “little” emergency such as frozen pipes or some such) rebuild as soon as you can.
While in the normal routines of life it is not wise to keep a large amount of cash in your home, that might be exactly where you need the ready money for an emergency. Be creative in finding unobtrusive, unusual places to stash your cash. Not under the mattress, in a sock in the drawer or any of the other spots that have become so cliched they are obvious. Some suggestions from the experts:
Put cash, ideally in smaller bills such as tens and twenties, inside a plastic baggie, place it in a meat tray and put it in the freezer as unobtrusively as possible among other packages of meats.
Bury it in the yard, inside a piece of PVC pipe or other water-impervious container. (Use good sense. If your yard is covered in six feet of snow in the winter, take another tack.) The same idea would work with a large planter inside your home.
If you want to put an envelope of bills behind a photo or piece of art, insert it between the cardboard backing and the picture, not on the back.
Take a tip from the old movies and put “the evidence” inside a book from which you have carved a hollow section. Of course, that only works if you remember which book you used. In a real emergency, there will be no time for browsing.
Create a “decoy safe,” by putting the cash into a small container and burying it in any larger container that looks like anything but a bank — a mayonnaise jar, tin can, shaving cream tube, etc. etc.
Just remember that accessibility is the key in this instance. If you hide it so thoroughly that it takes hours to retrieve it, you need to reassess. Emergencies don’t, by their nature, provide lots of time to contemplate. The important thing is to recognize the need for an emergency fund, start now to provide one and have it handy if the need arises.