Wednesday, February 28, 2007

How Much Emergency Money Should You Have On Hand?

The Simple Dollar has a post on why you might need to have some emergency cash on hand. However, he doesn't really give you any guidelines on how much.

Is a Franklin enough? A week's salary? something else?

It depends on what you can do and what you are expecting to happen.
For example the various relief agencies will take 72 or more hours to get on scene for most disasters. But it often takes about 2 weeks to restore services. In any case it may take longer to get to your particular home.

Having some cash on hand is great to help cover some items you may have forgotten. If you lose your job you need to understand that it generally takes 1 month per $10,000 your make to find a similar job. For example, if you had earned $60,000/year, it will generally take about 6 months to find an equivalent paying job. So having 6 months of expenses (mortgage, bills, insurance premiums, &etc.) saved up is a good thing to have, but that is a family emergency and you'll still have access to banks. Though if you identity is stolen you may have a job but no way to get to your bank accounts, so having a month or two's expenses handy may be very handy.

If there is an evacuation having enough cash on hand to drive across the country, eating fast food and staying in motels and filling up the car is useful to have. Things will cost more near the site of the disaster so expect to pay more.

If you want gold for a economic disaster, like Post-War Germany (doesn't matter which one) or current Argentina, the best choices are plain gold jewelry like necklaces and rings. My parents and grand-parents made use of these are an alternative currency on occasion.

Most people have a good idea of what they are worth as you see them for sale in every mall, unlike gold and silver coins which very few people are familiar with. Besides they are pretty and most people want them.

For emergency supplies a good progression is this:
• A 72 hour kit for the office/car to get back home.
• A 2 week supply of food, water and fuel for a BBQ at home.
• A 1 week supply of cash for food, gas, motels in case of evacuation.
• Expand home supply to 2 months built up over time to a years supply.
• Increase cash supply to cover 2 months of expenses built up over time to a job search level.

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