3375: Should Cash Be Part of Your Emergency Fund? By Honey Smith with Get Rich Slowly on Smart Emergency Planning

Summary

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Optimal Finance Daily — Episode 3375: “Should Cash Be Part of Your Emergency Fund?”

By Honey Smith with Get Rich Slowly | Hosted by Diania Merriam
Date: December 4, 2025

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Episode Overview

This episode explores a practical facet of emergency planning: whether and how much cash should be kept as part of your emergency fund. Drawing from personal anecdotes and the realities of disasters, Honey Smith (via Get Rich Slowly) and host Diania Merriam break down the pros, cons, and best storage methods for keeping physical cash on hand. The conversation goes beyond digital finance, focusing on real-world scenarios where a cash stash could make all the difference.

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Key Discussion Points & Insights

1. The Reality and Psychology of Emergency Cash

• The “Wallet Fairy” Story (01:15)
  Honey recounts receiving a novelty “wallet fairy” in college, symbolizing wishful thinking about never running out of money. Despite this charm, she shares hard experiences of financial scarcity:

  “I distinctly remember crying after going to the grocery store on a couple of occasions because I didn’t know how I was going to pay my bills after buying food.” (01:37)

• These lessons prompted deeper thinking about preparedness—especially after witnessing flash floods in Phoenix.

2. Pros and Cons of Keeping Cash On Hand

Pros:

• Out of sight, out of mind (02:54)
  Physical cash kept “out of the way means you’re less likely to think about it and thus be tempted to spend it unless there’s a true emergency.”
• Peace of mind (03:53)
  Cash can’t be garnished or digitally traced, which can add a layer of financial security in certain emergencies.

Cons:

• No interest earned (03:22)
  Keeping money in cash means missing out—even on “sub 1%” savings account rates, this adds up with larger amounts.
• If lost, it’s gone (03:53)
  “If you lose the money, it gets destroyed, you’re robbed… you may have very little recourse.”
• Security risks
  The more cash at home, the higher the risk from theft, fire, or loss.

3. How Much Cash Is Enough? (04:22)

• Conventional wisdom says an emergency fund should cover “three to six months of expenses”—but few are comfortable keeping that much in physical bills.
• Consider local risks:

  “If you live in an area that’s prone to natural disasters, keeping enough cash on hand to buy food and supplies in the event that credit or debit isn’t an option… may be smart.”

• Strike a balance: Be realistic about needs but avoid paranoia.

4. Where to Keep Emergency Cash? (05:28)

• Diversion Safe at Home:
  • Inexpensive, disguised as everyday items (books, cleaning products).
  • Downside: Usually not locked—“if someone does happen upon it, the gig is up.”
• Home Safe:
  • Larger, secure, often fire/waterproof.
  • Downside: Expensive, hard to hide, takes up space.
• Safe Deposit Box:
  • Secure in banks, post offices; minimal rental fee.
  • Downside: Not instantly accessible—“depending on the circumstances… this may or may not be feasible.”
• Hidden costs:
  • Insurance, alarms, and peace of mind can add indirect costs.

5. Host’s Personal Take & Final Reflections (10:01)

• Diania notes she barely uses cash and values digital transaction records for budgeting.

  “The last time I needed cash I went to the ATM only to discover that my debit card had been expired for six months and I had no idea.”

• She highlights that digital systems may be down in disasters—physical cash can be essential for food, gas, and medicine.
• Bottom line:

  “Cash is also the most insecure asset you can have, so keeping it to a minimum in the house in case of fire or theft is a good rule of thumb. How much cash you'll need is highly personal, but I can't imagine holding more than $1,000.” (10:33)

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Notable Quotes & Memorable Moments

• On past money struggles and learning:

  “If the magic were foolproof, this fool wouldn’t have learned her lesson and started digging her way out of debt, right?” — Honey Smith (01:29)

• On inflation and missed opportunities:

  “Even parking your cash in a savings account… it’s better than nothing, right?” (03:38)

• On realistic emergency cash needs:

  “It’s important to be realistic, but there’s no need to be paranoid.” (04:46)

• On practicality of cash storage:

  “When was the last time you went to the bank?” — On safe deposit boxes (06:48)

• On personal cash limits:

  “I can’t imagine holding more than $1,000.” — Diania Merriam (10:33)

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Timestamps for Key Segments

• 00:00 – 01:13: Ads, show intro skipped
• 01:13 – 02:54: The “wallet fairy” story & real-life cash struggles
• 02:54 – 03:53: Pros and cons of storing cash
• 03:53 – 04:46: How much cash to keep
• 05:28 – 07:32: Where to keep cash and storage options considered
• 10:01 – 10:45: Host’s commentary, personal viewpoint, conclusion

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Summary in the Podcast’s Tone

This episode spotlights the nuanced question: Should we stash cash as part of our emergency fund? Honey Smith (Get Rich Slowly) and Diania Merriam remind us that while digital banking rules our day-to-day, a little green paper can save the day when disaster strikes and the apps go dark. The message is clear—find your own comfort level, keep it manageable, and prepare for emergencies according to the real risks in your life.

As Diania puts it, don’t let paranoia drive your choices, but don’t skip cash entirely—“keeping it to a minimum in the house in case of fire or theft is a good rule of thumb.” Consider what you’d need for a few days’ supplies if the world went offline, and keep the rest earning interest in the digital world.

Your optimal financial life is about balance—this episode is your friendly nudge to be ready for anything.

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Transcript

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This is Optimal Finance Daily. Should cash be part of your emergency fund? By Honey Smith with getrichslowly.org When I was in college, one of my co workers at my part time on campus job gave me a funny little gift that I use to this day. What was it? It's called a wallet fairy. You put it in your wallet and you'll never be out of money when you need it. I can't honestly say that the magic has been foolproof. I believe I've mentioned on a couple of occasions the time I didn't wash my hair for a month because I couldn't afford shampoo. And I distinctly remember crying after going to the grocery store on a couple of occasions because I didn't know how I was going to pay my bills after buying food. But I guess if the magic were foolproof, this fool wouldn't have learned her lesson and started digging her way out of debt, right? But you know what? National Preparedness Month, also known as September, may be over, but it's also a good idea to consider your plans if an emergency occurs. And after the flash flooding we saw this year in Phoenix, I'm thinking a lot more seriously about what it would be like to be out of money when I need it. I'm starting to think that it's important to keep cash readily available, but I wanted to really sort out why and how much and where. So here it goes. Should you Keep an Emergency Cash Stash to be clear, I'm not talking about keeping an extra $20 in your wallet, though that's not a bad idea. I'm talking about keeping a significant amount of cash on hand in case of emergencies in the hundreds or thousands of dollars. Here are the pros and cons for doing so that I can think of.

Out of sight, out of Mind Even if you put your emergency fund in an online only account such as Capital 1360, at least it's there you receive bank statements reminding you of its presence. Maybe it factors into your mint net worth. Stashing actual physical money somewhere out of the way means you're less likely to think about it and thus be tempted to spend it unless there's a true emergency.

Not earning Interest if you invest your money, you're hopefully earning interest faster than inflation can erode the value of your cash. The common wisdom is that inflation is about 3% annually, so you should aim to beat that benchmark, taking into account things like diversification and your own risk tolerance. Even parking your cash in a savings account with their interest rates of 0.95% or less, based on this week's savings account rates, it's better than nothing, right?

Peace of Mind Cash can't be garnished like a paycheck or bank account, and it isn't easily traced. For some people, having access to money that flies under the radar, so to speak, may make them feel more secure. And if it's gone, it's gone. Cash isn't easily traced. If you lose the money, it gets destroyed, you're robbed, etc. You may have very little recourse. How much should you keep? Assuming that you've decided keeping some amount of cash on hand is best for your particular situation, the next question becomes how much cash exactly should you keep? A solid emergency fund may be three to six months worth of expenses, but that's probably more than most people are comfortable keeping in cash. Not to mention, even at sub 1% interest rates, when you start getting into the thousands of dollars, you start missing out on a decent chunk of change. The logical question to ask yourself at this point is what emergency situations do you think would require physical cash? For example, if you live in an area that's prone to natural disasters, keeping enough cash on hand to buy food and supplies in the event that credit or debit isn't an option due to a power outage or what have you may be smart. It's important to be realistic, but there's no need to be paranoid. Where should you keep it? I suppose theoretically you could keep it anywhere. However, if you want to make sure you're the one who is actually keeping it, your main options are likely.

1. In your home in a diversion safe A diversion safe is something that looks like an ordinary household item or product that actually is used to hide items of value. Diversion safes might look like books, cleaning chemicals, cans of soda water or food, or even toiletries. Think of a can of hairspray. The pro is that diversion safes are relatively inexpensive, but most don't actually require a lock to open, so if someone does happen upon it, the gig is up. Diversion safes also tend to be relatively small, which may be a pro or a con, depending on your needs.

2. In your home in an actual safe. A real safe is usually larger and can thus accommodate more items. If you have other valuables besides cash that you'd like to protect, it may require a key or combination to open. Some are even biometric, and unlike most diversion safes, many are fire and waterproof or fire and water resistant. Accordingly, they also take up more space, are difficult to hide, and may be expensive.

In a safe deposit box For a rental fee, your cash, other valuables, and important documents may be stored in a bank, post office, or other institution. The fee is usually fairly minimal for most needs, and you have the reassurance that most institutions offering this service are under some form of guard. 247 however, that does mean if you want to access the contents of your box, you must leave your house. Depending on the circumstances under which you need to access your cash, this may or may not be feasible, as after all, when was the last time you went to the bank? There may also be indirect costs when storing items at home. If you have large amounts of cash or valuables, you may need or want a robust alarm system, for example, that may entail an upfront cost and or a monthly subscription.

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I use cash so infrequently that I haven't really considered keeping some cash on hand. In fact, the last time I needed cash I went to the ATM only to discover that my debit card had been expired for six months and I had no idea. A big reason I don't use cash often is because I like having a record of digital transactions. It makes it much easier to track my spending. But this article is specifically about emergency preparedness and I think it made some good points. Emergencies ranging from catastrophic weather like hurricanes or wildfire to power outages can make it difficult to access your money. If you can't access your digital currency or your banking systems are down. Having cash can allow you to get gas, food and medicine with ease. However, cash is also the most insecure asset you can have, so keeping it to a minimum in the house in case of fire or theft is a good rule of thumb. How much cash you'll need is highly personal, but I can't imagine holding more than $1,000. And that's a wrap for another Thursday show. Have a great rest of your day, and I'll be back tomorrow as usual, where your optimal life awaits.