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Households should keep some cash at home so they can pay for essentials during crises, according to an analysis of four major disruptive events in Europe, including the pandemic and Russia’s invasion of Ukraine in 2022.
Consumer demand for banknotes surged in Europe during each of a string of crises, the research, published by the European Central Bank, showed Wednesday. Physical currency offers “distinct psychological and practical utility,” says the study, whose title urges the public to “keep calm and carry cash.”
The findings support the growing recognition among authorities that cash is “a critical component of national crisis preparedness,” the researchers write.
For example, they note, authorities in the Netherlands, Austria and Finland recommend that households keep between about €70 ($82) and €100 ($117) per person at home, or enough to cover essential needs for around 72 hours.
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In Sweden, the recommendation is to hold enough cash to pay for things like food, medicines and fuel for at least a week. “Calculate the total cost of at least a week’s worth of these items for your family. Keep cash at home, in small denominations, for trading purposes if digital payment methods have been interrupted,” the official advice says.
Explaining banknotes’ appeal, the European Central Bank study says that in moments of acute stress the public sees cash as a reliable store of value and a resilient means of payment. Another such crisis erupted in April, when a massive outage knocked out power in Spain and Portugal, affecting payment terminals and forcing many shops to accept only cash payments.
“Cash provides essential redundancy – a ‘spare tire’ – for the payment system,” the study’s authors write. “This redundancy is vital for any system, as no system is infallible.”
The unprecedented Covid-19 pandemic saw sustained cash hoarding by Europeans driven by prolonged uncertainty, including about their future income, they note.
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