In a significant move to bolster citizen preparedness, the European Union (EU) has recently recommended including cashMoney in physical form such as banknotes and coins. More in emergency kits. This advice comes as part of a broader effort to ensure that individuals and households are equipped to handle various crises, from natural disasters to economic and geopolitical instability. The recommendation underscores the enduring importance of cash as a reliable and universally accepted form of paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More.
The European Commission is urging member states to ensure citizens have an emergency kit that allows them to be self-sufficient for a minimum of 72 hours in the event they are cut off from essential supplies. The kit should include food, water, and copies of important identity documents and cash.
Several member states already have such guidelines with varying timeframes. France, for instance, calls for a 72-hour survival kit that includes food, water, medicines, a portable radio, a flashlight, spare batteries, chargers, cash, copies of important documents including medical prescriptions, spare keys, warm clothes and basic tools such as utility knives.
Cash remains a vital resource during emergencies for several reasons. Firstly, it provides immediate liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More, allowing individuals to purchase essential goods and services without relying on electronic payment systems that may be compromised or unavailable. During power outages or internet disruptions, which are common in natural disasters, cash transactions can continue uninterrupted.
Secondly, cash offers a level of privacy and security that digital payments cannot match. In situations where personal data might be at risk, cash transactions do not leave a digital trail, protecting individuals from potential data breaches or surveillance.
Thirdly, cash serves as a store of valueOne of the functions of money or more generally of any asset that can be saved and exchanged at a later time without loss of its purchasing power. See also Precautionary Holdings. More. In times of economic uncertainty or financial crises, holding cash can provide a sense of security. It allows individuals to manage their finances more tangibly, which can be particularly important for those who are less comfortable with digital financial management.
The EU recommends that individuals keep a sufficient amount of cash in their emergency kits to cover essential expenses for at least a week. This typically translates to a few hundred euros, depending on individual circumstances and local cost of living. The exact amount should be tailored to personal needs and the potential duration of the emergency. It is also advisable to keep a mix of smaller denominations to facilitate transactions when changeThis is the action by which certain banknotes and/or coins are exchanged for the same amount in banknotes/coins of a different face value, or unit value. See Exchange. More may not be readily available.
The EU’s recommendation aligns with similar initiatives in other countries, both within and outside the EU. Several nations have recognized the importance of cash in emergency preparedness and have included it in their official guidelines.
The inclusion of cash in emergency kits highlights its enduring value in a world that is rapidly shifting towards digital payments. While digital transactions offer convenience and efficiency, they are not without vulnerabilities. Cyber threats, system failures, and infrastructure disruptions can render digital payments unusable, making cash a crucial fallback option.
Furthermore, cash is universally accepted, making it a reliable form of payment in any situation. This is particularly important during emergencies when access to banking services or digital payment systems may be limited or unavailable.
The EU’s recommendation to include cash in emergency kits is a timely reminder of the importance of being prepared for all eventualities. Storing emergency cash is a positive policy, but for cash to be effective in a disaster situation, the cash cycleRepresents the various stages of the lifecycle of cash, from issuance by the central bank, circulation in the economy, to destruction by the central bank. More must be fully functional under normal circumstances. This requires easy access to cash and its full acceptance across all sectors. As the world continues to embrace digital payments, the role of cash in ensuring financial security and resilience cannot be overlooked. By including cash in their emergency preparations, individuals and households can better navigate the challenges posed by natural disasters, economic instability, and other crises.
The global adoption of similar recommendations by countries like the United States, Canada, Japan, Australia, and New Zealand underscores the universal recognition of cash’s value in emergency situations. As we move forward, balancing the convenience of digital payments with the reliability of cash will be key to ensuring comprehensive preparedness and resilience.