Lending Club Blog

Stockpiling Cash

When you read about urban survivalists stockpiling “beans, bullets, and band-aids” in these tough economic times, it’s only natural to consider what you would do in a worst-case scenario. One item that is often overlooked is our current dependence on electronic monetary transactions. As I discussed in Cashless Society, cash has a declining role in most of our lives. When I say cash, I don’t mean liquid investments or cash equivalents, but rather actual currency within your reach.

At any given time, I probably have an average of less than $10 in cash. I suppose that if I really looked hard, I could probably scrounge together about $50 from my coin jar, State Quarter collection, and my daughter’s piggy bank. This lack of cash in my life begs the question of what would happen if our electronic banking system were somehow disrupted, through a major computer glitch or deliberate attack.

Imagine that ATMs, electronic transfers, and credit/debit purchases no longer worked. I suppose stores could process cards using a manual machine, as they used to do, but few even have the old technology available. Checks might still be accepted, though they too often rely on electronic verification. There would likely be long lines at the banks and it’s reasonable to assume that even they could be affected by such an outage. The same technology that allows you to withdraw money from every branch of your bank likely means that an individual branch doesn’t have your account balances but instead relies on a computer connection to some central location. Such a scenario would basically mean that you would have no access to cash.

Such a catastrophic failure of the banking system probably wouldn’t affect you in some ways that you might expect. I doubt that utility companies would shut off service for non-payment if none of their customers had a method to pay for it. If the outage lasted more than a few days, you’d probably have bigger problems to worry about than the lack of access to cash. An extended outage that affected everyone would probably also lead to government intervention to help citizens through it. An outage of a few days is much more plausible. If you can’t imagine such a scenario lasting more than a few minutes, remember that all commercial flights in the US were grounded for a few days after the September 11th terrorist attacks, which previously would also have been seen as impossible. Even a few days without access to alternative forms of money could expose the weakness of not having any cash on hand.

At a minimum, you may want to be sure to have some cash when you gather other survival supplies ahead of a big storm. To be safe from unexpected events as well, it makes sense to always have access to a small stockpile of cash. The amount that you choose should be aligned with your expectations of the duration of the outage. I wouldn’t recommend having too much cash on hand because it doesn’t earn interest and is at risk of theft. Nonetheless, having enough to survive a short period without access to other forms of money may be in your best interest.

Tuesday, November 25th, 2008 at 7:38 am

Comments (1)

  1. Marc:

    This sounds a lot like the Y2k literature of the late 90s. It’s a
    valid point nonetheless. More important though, how much is our
    money really worth when institutions from finance all the way to
    the coffee people are going kaput? Compound that with personal
    savings being as low as they are and bailout-happy governments who
    haven’t spoken much about new legislation to help prevent these
    market fiascoes. What is the true value of a paper dollar at this
    point? Perhaps we’ll be lining up for turkey-flavored Soilent Green
    next thanksgiving. Ok, maybe my cheese is a bit off its cracker,
    but it doesn’t seem like we can put our trust in anyone these days.

    November 25th, 2008 at 11:31 am


Welcome Home

Lending Club named #5 on Forbes’ Most Promising Companies List

Get ready for tax season with Lending Club’s Tax Form Guide

New Adjusted Return Metric

See more
Lending Club Awards
  • Archives z

Recent Posts

We’ve acquired a company!

Today we’re excited to share the news that we… Read More »
April 17, 2014

Lending Club customer information safe from Heartbleed Bug

You may be hearing about… Read More »
April 11, 2014

New: Loan Origination Data Update

An update for users of our platform statistics and… Read More »
April 3, 2014

Lending Club Launches Business Loans

Today, Lending Club announced the launch of business loans… Read More »
March 20, 2014

Lending Club Extends Privacy Protections for Borrowers

At Lending Club we pride… Read More »
March 19, 2014

How to Protect Yourself from Online Scams and Swindles

It is more important than… Read More »
February 11, 2014

New Statistics Charts to Help Investors Understand Returns

At Lending Club, we believe… Read More »
February 6, 2014

Welcome Home

I became a U.S. citizen earlier this month. When… Read More »
January 27, 2014

Lending Club named #5 on Forbes’ Most Promising Companies List

Lending Club has won the… Read More »
January 24, 2014

Get ready for tax season with Lending Club’s Tax Form Guide

Tax season is coming. To… Read More »
January 13, 2014