For many people, the "Emergency Fund" is the amount of money held in their checking, savings, or money market funds. While it might protect you from a financial setback, it is not the same thing as Cash in Hand.
Imagine you live in a city hit by a hurricane, earthquake, or other disaster, phone/power/internet access is down and you need cash NOW. How much cash do you typically walk around with? Could it get you out of town and rent a hotel for a day or two?
In my case, I tend to get money out of the ATM in $100 transactions. In terms of walking around money, it works for me and I usually have a little left over each week. Nevertheless, I realized I wasn't prepared for a disaster.
Cash in Hand Strategies:
1. Car Fund - after forgetting my wallet a few years ago, I stashed a $20 bill in my glove compartment just in case. When gas was reasonably priced, it would fill up my compact car and get me home in an emergency. Now that I have a SUV and gas is $3 per gallon, I am going to raise it to $50.
2. House Cash Stash - starting last week, I am working my way up to a $500 Safety Fund. Stashed in an envelope in my fire safe, it should provide a nice cushion for most contingencies. To fund it, I am planning putting $20 per week away until the it is fully funded.