Given the current global situation, marked by the conflict in Iran and the impact it is having on gasoline prices, several European banks and organizations are recommending that citizens have cash at home to face possible episodes of instability or interruptions in payment systems.
This warning is not new. The European Central Bank (ECB) already addressed this issue last summer in its report Keep calm and carry casha document that in recent weeks has once again gained relevance after being cited by numerous media and experts. The study was prepared from the analysis of several recent crises, such as the Covid-19 pandemic, the invasion of Ukraine, the Greek crisis or episodes of blackouts, and reopens the debate on how much cash should be kept at home in emergency situations.
Andrés Millán, a labor lawyer known on social networks as @lawtips, has spoken about these recommendations in an Instagram reel. Their conclusion is clear: the amount of cash suggested by some European organizations falls far short if the crisis lasts more than a few days.
Why cash at home is worth more than the same money in the bank
“Many organizations are saying it,” Millán acknowledges, “the problem is that they recommend amounts of 1,000 crowns in cash, that is, 93 euros per head.” And this, “in a minimally prolonged crisis, is worth absolutely nothing,” he assures, taking into account current prices.
The figure of 1,000 crowns comes from the Swedish Riksbank, the central bank of Sweden, which set it as the minimum recommended reserve per adult (about 90 euros at the exchange rate). The ECB, for its part, raised the recommendation to 100 euros based on the guidelines already in force in Austria, Finland and the Netherlands. Both figures point to the same range. And for Millán, that range is insufficient.
The lawyer’s central argument is based on liquidity, that is, the ease of using money immediately. “In a context of war, a 50 euro bill is worth much more than 50 euros in the bank,” he explains, “because having them available makes them much more liquid.”
When ATMs are out of service, payment terminals stop working or banks temporarily close, the money in a current account exists in the records but is inaccessible because it requires infrastructure to access it, while in physical form it does not depend on coverage, electricity or permission from the bank to withdraw it.
How much to have and for whom the advice changes
Millán does not recommend emptying the accounts. He clarifies it himself. As for risk-benefit, “what makes the most sense is to have most of your money invested, without a doubt,” he points out. But then he adds an important nuance: this optimal scenario does not describe the situation of the majority. “There are people who have a lot of money without investing in the bank,” he details, for which he recommends it is better to have it physically.
For those who keep their savings in a checking account without obtaining any return, the opportunity cost of keeping part of it at home is practically zero. And the gain, in terms of resilience to emergencies, can be considerable.
For the average citizen, with or without investments, Millán also raises the bar above what European organizations recommend. “In a context like the current one, I would probably have more than 90 euros per head in cash,” he concludes in the video, in direct reference to the geopolitical tension that has led the ECB and other central banks to publish this type of analysis in recent months.