Dear Money & Crisis Reader,
In October 2017, a jet laden with emergency supplies was making a beeline for Puerto Rico.
Just days before, Hurricane Maria had hit the island hard.
The Category 4 storm left residents without power. The roads were carpeted with debris. Half the island had no drinking water.
But the jet wasn’t carrying food, water or portable generators.
Instead, it was transporting cold, hard cash.
You see, while the U.S. government struggled to provide adequate assistance to Puerto Rico’s residents, the Federal Reserve Bank of New York spotted a crisis no one was paying attention to…
Terror at the ATM
Grocery stores all over the island had food and water in the aisles.
There was just no way to pay for it.
With the banks closed, the economy of this small U.S. territory ground to a halt.
At the few ATMs that were still working, hundreds of people queued for hours just trying to withdraw last month’s paycheck to feed their families.
Folks left empty-handed as ATMs ran out of cash.
This was the situation on the ground just one week after Maria.
Puerto Rico technically had plenty of cash in government facilities. But getting it from the storage sites to the banks was easier said than done.
The problem was threefold:
- There weren’t enough armored cars to transport the money — nor was there gas to fuel them.
- They didn’t have enough security guards on duty to man the armored cars they had.
- The roads were still covered in debris and practically impassable for the large armored vehicles.
At the time, it was actually easier to fly in pallets of physical cash from over 1,600 miles away.
So Bill Dudley, the president of the New York Fed, chartered planes filled to the brim with cash to Puerto Rico.
Cash Is King
The lesson here is simple: In an increasingly digital world, it’s too easy to forget about the importance of cash.
With the rise of shopping on Amazon and tap-to-pay debit cards, you can go weeks without ever touching physical cash these days.
In fact, if faced with a disaster like Hurricane Maria or a grid-down situation — where ATMs could be offline for the foreseeable future — eight out of 10 Americans would be carrying less than $50.
Now, I’m not advising you to walk around with a wad of cash in your pocket.
But it’s a good idea to maintain a secure stockpile of cash at your home to see you through a crisis.
Getting one started is easier than you think.
It’s just like saving up for a big-ticket item like a new television or car.
Just start small. Like, say, building a stash of $1,000 with $20 bills. Try not to use larger bills, because they won’t be easy to change once the lights go out.
Once you reach $1,000, I recommend trying to save at least a month’s pay on top of that. Then work up to three-four months’ pay.
In a prolonged crisis like we saw in Puerto Rico, you might find yourself spending more money than you think. Especially if merchants take advantage of a dire situation and try to price-gouge desperate folks just trying to survive.
Just over a week after Hurricane Maria hit, The New York Times reported that one man was walking around neighborhoods selling packs of cigarettes for $10 a pop.
It’s tempting to get angry at someone for taking advantage of their neighbors in a time of need. But he was only selling his goods at such a high price so he could afford the price-hiked goods in the stores.
According to the man, he had spent $1,000 in just nine days and was running out of emergency cash.
This isn’t surprising. Two weeks after the disaster, the Puerto Rican government reported that they had received 100 complaints of price hikes on basic necessities and 29 complaints over increased gas prices.
Keep in mind, most of the island still had no internet. So this is likely only a snapshot of a larger problem.
You can’t really blame anyone. With high demand and low supply, prices will rise. It’s basic economics.
But the takeaway is clear: You can’t count on your money in the bank to save you in a crisis. Savvy folks will keep a store of emergency cash on hand at all times.
In a future issue, we’ll discuss options for storing your emergency cash safely and covertly. Stay tuned…
All the best,
Editor, Money & Crisis