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Emergency Funds – making the case for cash in a crisis

During a localized disaster several things can happen that will have an immediate financial impact on you.

First if the power grid goes down, America’s preferred form of payment, the “card” will be useless.
Second, everyday items will become increasingly expensive due to supply and demand.

For example, during and after Hurricane Katrina, necessities became prohibitively expensive. I have heard stories of bottled water going for $10 a bottle. However insane (and illegal) this price gouging is, it is something we have to consider when making disaster preparations.

Prepare yourself financially.

First, I always keep a few hundred dollars in cash in my bug out bag. I put this money in years ago, and I have left it there ever since. This money is as crucial to me as my knife and water supplies. In most disasters, even some wide spread disasters, cash will retain a measure of value for a short time period.

There will always be some enterprising person who will gladly accept your green cash money in exchange for something you need. The value of your money will diminish in direct relationship to the size/magnitude of disaster and recovery time.

Meaning — if the disaster is localized, the value shouldn’t diminish much at all. This is the economics of price gouging in a single sentence.

However, if the disaster is widespread, and the time for returning to normal life is longer, the buying power of a dollar will decrease. Even in a large, widespread disaster that has little chance of recovery you will probably have a window of opportunity where cash will have some buying power.

The ability to use cash in that situation will vanish fairly quickly, so use it while you can and get some good bartering stock.

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