In a lot of ways, we’re living in a post-cash era. We make day to day purchases using debit cards. We split dinner bills with our friends using instant cash exchange apps like Venmo. We even live in a universe where a mysterious thing called blockchain contains virtual tokens that we actually exchange as currency. And of course, we do so much of our shopping, bill-paying, and socializing online at this point that most of our payment information is just saved in our computers and smartphones. So what’s even the point of cash if you’re not running an underground gambling ring?
Well, it turns out there are actually a lot of really compelling reasons to keep a healthy supply of cash on hand at all times. There’s a certain independent financial security in keeping an emergency stockpile of dollar bills at your ready disposal that simply can’t be replicated by any other method of payment.
That’s because cash retains a liquidity that no other asset can match. Due explains that liquidity refers to the ability to “meet your obligations without taking without incurring a loss. In other words, you can still carry out basic economic actions….buying, selling, paying off your debt, or putting food on the table without using a credit card or taking out a loan.”
Cash affords a type of liquidity that remains pertinent even in times of economic uncertainty and sociological calamity in a way that, according to Due, makes it the single most valuable asset that an individual or business can possess. Of course, it is neither practical nor possible to exist in a world of cash only. Your bank would not likely appreciate receiving your monthly mortgage payment in stacks of $10s and $20s.
However, it is advisable that you do have immediate access to a stash of cash at all times. When we say at all times, we mean that it is advisable to keep a modest sum of cash on hand as well as a modest sum in your car if you drive one regularly, as well as keeping a more substantial sum of cash stored somewhere safely and discreetly in your home.
A Clarification of Terms
The term cash can be somewhat more expansive in meaning than simply the sum of bills and coins in your pocket. According to Due, in business terms, cash can refer both to the literal cash at your disposal and to any asset that can be readily converted into cash within the space of 90 days. In other words, says Due, money in your savings, checking and money market accounts; money invested in liquid financial products like stocks, bonds, U.S. Treasuries, and ETFs; and even personal effects with meaningful market value like automobiles, jewelry, and appraised collectibles.
However, from this perspective, cash simply refers to the assets available to you when you require funds with immediate liquidity, as might be the case with a struggling business. But for our purposes, cash literally refers to the money in your wallet, purse, glove compartment, junk drawer, safe, and mattress. We’re talking dollars and cents in the most literal terms. While businesses may have 90 days, when you find yourself in the midst of a regional power outage and in search of emergency supplies, 90 days isn’t good enough. You’ll need that money in hand right away. For this reason, our focus is on cold, hard cash.
Now, if you’re looking for ways to bring a little more cash into your household, we invite you to check out these 10 Reasons You Should Get Yourself a Side Hustle.
If, instead, you’re looking for a few solid justifications for always having cash at your fingertips, read on…
1. Tipping for Services
Obviously you can write in a tip at most restaurants when you pay with a card. But honestly, every single server and bartender in the world would rather walk home with cash in pocket than wait for credit card purchases to be processed and disbursed. So if you’d like to lend a helpful hand to the hard working people in the food services industry, cash tipping is always better. Then of course there are the countless transactional experiences in your life where card tipping isn’t possible. Not only should you always have a pocket full of cash, but you should always have a few small bills at the ready disposal for tipping valets, coat checks, bellhops, manicurists, restroom attendants, and the gas station attendant who is considerate enough to squeegee your windshield while you wait. In many of these situations, you simply won’t have the ability to show your financial appreciation unless you have a small supply of $1s and $5s ready to go.
2. Some Places Still Only Take Cash
Whether you’re shopping for trinkets in the small ethnic enclave of a big city, buying cool vintage clothes at a pop-up stand, perusing local art at a craft fair, or picking up fresh produce at the Sunday farmer’s market, there’s a good chance you’ll encounter a cash-only merchant. You’ll want to be particularly conscious of this fact when you travel. You’d hate to pass on that one-of-a-kind antique, that freshly trawled lobster roll, or that cab ride to the airport because they don’t take cards. Obviously, when it comes to international travel, you should have a robust supply of the local currency on hand. But take comfort in knowing that the U.S. dollar is accepted almost anywhere in the world, whether as a matter of official government policy or as a matter of unofficial practice by local merchants. Just make sure you understand the currency exchange rate before you attempt to make purchases using the dollar. And as a side note, if they accept cash, there’s also a chance they’re willing to haggle. Don’t be afraid to attempt negotiation.
3. Emergencies Happen
Natural disasters, power grid failures, and the current pandemic demonstrate the disruptive impact that emergencies can have on our everyday lives. And in the face of these emergencies, one common feature is a breakdown in the availability of basic services from electricity and fuel to light and water. While it goes without saying that everybody should keep a good stockpile of emergency supplies like water, fuel, batteries, flashlights, and non-perishable food on hand, the pandemic revealed the inherently unpredictable and potentially lengthy nature of some emergency disruptions. Rolling closures of regular retail stores, local bank branches, and more has made it difficult for many Americans to obtain basic supplies as the pandemic has worn on. For many, a basic supply of emergency cash—Go Banking Rates suggests a minimum of $1000 in your emergency fund—proved essential for making purchases in highly compromised and scattered local markets. The pandemic proved that, when all else fails, cash still remains your best recourse for obtaining critical basic supplies from jugs of water and over the counter medications to gallons of gasoline and even electricity generators.
4. Your Card May Not Work Everywhere
You know what’s embarrassing? Going to the bar at a Broadway show, buying two absurdly expensive drinks, then having your Credit Card declined. Trust me. I know. I didn’t see the security alert on my phone asking me to approve this purchase in a city far away from my own until it was too late. I stood there, red in the face, fumbling for a different card. It probably would’ve been easier if I’d had a wad of cash on hand. At least I’d have made a faster escape from the cold eyes of the judgmental New Yorkers in line behind me. Consider it a valuable lesson learned. Through no fault of your own, your card may fail you. Whether it’s because you have a malfunctioning chip, or you’ve unwittingly become the victim of identity theft, or the machine is simply not working wherever you happen to be, there’s a chance your card could come up short. Cash, on the other hand, always works.
5. Don’t Get Caught At Toll Roads
Every toll road and bridge in America should be on a single universal digital pass system, and every single vehicle should be equipped with a digital password device. But that hasn’t happened yet, which means that every once in a while, you will come upon a toll booth collector who simply can’t let you pass without first collecting $1.10. If you don’t have it, you’ll have to sit there while they take your license, write down your information, and send a bill to your home. Obviously, getting a bill for $1.10 isn’t the biggest deal. The consequence is probably worse for the poor folks stuck behind you while your information is being recorded. And who needs that kind of bad karma? The whole thing is a hassle that can be avoided simply by keeping cash in your car’s center conole at all times.
6. Be Ready for Street Crime
Seems like the opposite would be true, right? But Moneycrashers suggests that keeping a readily accessible $20 on hand at all times is at least one possible strategy for satisfying the demands of a mugger. This seems a worthwhile tradeoff if it means you get to keep your phone, watch or diamond-encrusted cane. (Total sidenote, but relevant as a piece of financial advice. Don’t walk in public with a diamond-encrusted cane). Do walk in public with some cash tucked safely and discreetly in a secure place on your person while also keeping a more immediately accessible bill in a front pocket to be used only in the event of mugging.
7. In Case of Blackout
In an article from Business Insider, author and entrepreneur Jen Glantz recalls growing up in Florida, where storm season often brought sustained blackouts and power outages. When this occurred, many local merchants reverted to the ever-trusty locking cash box system. Without the electricity to run cash registers, process payments, power ATMs or provide the wifi for online payments, merchants working to keep their businesses alive—and their customer bases armed with critical supplies—must become cash-only operations. Those living through the devastating winter storms in Texas last winter, or subsisting in Puerto Rico in the trying weeks that followed Hurricane Maria, or those enduring the fallout from massive California wildfires can attest to the importance of preparing for a cash-only local economy while consumers and merchants alike wait for the lights to go back on.
8. You Might Get Some Discounts
Carrying cash can actually save you money in a number of purchasing contexts. Why? Well, most merchants must pay a fee on every credit or debit card purchase they process. The same is typically true for stores that use eCommerce purchasing apps like Square or other QR code-based apps to process customer payments. Generally speaking, you’ll be paying these fees, which is why many merchants are willing to cut you a break for paying with cash. It’s common, for instance, to see two different prices per gallon at gas stations that accept both cash and charge. The same is true when you shop with local merchants, small restaurants, food trucks, and other establishments that might process a portion of their income “under the table.” In other words, if you buy a few books at a used book store and the vendor tells you that you can have them tax free if you can pay with cash, chances are that they won’t be reporting the sale to the IRS. In exchange for your friendly discretion and the paper bills in your pocket, you may save a few bucks on your purchase.
9. Dispersing Your Assets
Cash should simply be one of several ways that you keep assets on hand. It can be an important reserve supply for money when all else breaks down. For instance, according to Outdoor Life, “Argentina, Cyprus, and Spain all seized part of their citizen’s savings during economic upheaval in recent years.” We’re not suggesting that the U.S. government will necessarily seize your assets in the near future to stave off financial insolvency. Then again, we can’t necessarily rule it out…which just goes to show that cash is so important because it provides a financial backstop. When the unthinkable or unforeseen occur—a crash in the stock markets, a foreclosure on a piece of real estate that you own, a feverish cryptocurrency sell-off—you can lose everything in a single stroke…not to get all dark and foreboding on you. We don’t actually think that’s going to happen. But just to make a point, if all of those things did happen, your cash is the one thing that would remain entirely yours. If you plan to rebuild, you’ll need to start there. In less dramatic terms, it’s simply wise to keep your money in multiple places including your savings and money market accounts, the stock market, real estate, cryptocurrency, etc. Just be sure that the fireproof safe in your home is also one of the places that you keep money.
10. Protect Your Privacy
Another great reason to shop with cash is that there is little risk of identity or credit theft when you pull out a crisp $100 bill. The same cannot be said for processing your credit card with a shady auto mechanic who seems minutes away from being out of business. In other words, if you find yourself in a shopping context where there is limited trust between you and the merchant, this may be a good time to keep the numbers on your credit and debit cards safely sheathed in your purse or wallet. Having a decent sum of cash on you gives you both the power of purchasing and the power of anonymity. And it’s not always the criminals that you have to look out for. These days, every card purchase you make with a major chain store could result in the kind of targeting advertisement that you might find invasive. Who wants to buy an ointment at Acme only to suddenly find themselves on the receiving end of targeted advertisements from a broad and embarrassing array of topical skin treatments and dermatological specialists? Cash purchases can spare you that disturbing feeling of violation that comes with an advertisement that seems just a little too specific to be coincidental.
And as long as we’re on the subject of maintaining purchasing power while protecting your anonymity, we recognize that cash is rarely an option when it comes to online shopping. Indeed, that’s why cryptocurrency was invented. In the simplest terms, cryptocurrency is a virtual currency that carries many of the same benefits as does cash, including the protection of your anonymity and the ability to participate in secure, trustless transactions without the risks of fraud or breach. If you’d like to learn more, check out these 10 Reasons to Invest in Cryptocurrency.