"Save money for times of crisis" - ECB: Families should keep cash at home for emergencies
The European Central Bank (ECB) has stressed the importance of cash as a tool for national crisis preparedness, urging households to keep cash at home for emergencies. The call follows practices already in place in countries such as the Netherlands, Finland and Austria, where citizens are advised to have 70-100 euros per person in cash. Similar programs have been developed by Sweden and Norway.
The main argument is that digital systems can collapse at any moment. The call follows similar advice for citizens in member states to stockpile enough money, food, water and medicine to survive for 72 hours in the event of a service disruption. The advice was prompted by the war in Ukraine, the Covid-19 pandemic and natural disasters. Fires and floods have exposed Europe's vulnerabilities and led to increased spending on security and defence.
“Money is a critical element of national crisis preparedness,” says the ECB report, which examines the impact of crises such as the pandemic and power outages in Spain and Portugal. It also notes that physical currency “not only serves to meet individual needs, but also contributes to broader systemic resilience.”
“The utility of cash increases significantly when stability is threatened – regardless of the specific nature or geographical scope of the underlying shock, or the degree of digitalization,” the ECB also asserts.
Digital payments dominate retail transactions and banks are cutting costs by closing branches and ATMs. But policymakers are under pressure to ensure that households maintain access to banknotes and coins.
The ECB document highlights a paradox: Despite the fact that cash is increasingly absent from everyday payments, the demand for it increases when trust in financial or digital systems is shaken.
This pattern of behavior was evident during the pandemic and other events, such as the power outage that paralyzed Spain and Portugal in the spring.
In the case of the pandemic, cash increased by 140 billion euros in two years, compared with an annual increase of 55 billion euros before the crisis, the ECB notes. The increase came even as consumers turned to contactless cards and online shopping, due to health concerns and isolation.
According to the report, cash systems need to be built to withstand rare but extreme crises.
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