We all keep some cash on hand for those rare situations when we need money, such as when the neighborhood child offers to shovel your driveway or mow your lawn. You want to assist the entrepreneurial young child but do not want to deal with the trouble of driving to an ATM, so you keep some cash on hand. However, you could be making a tremendous mistake if you hide money in your home because you do not trust it in a bank.
Why hiding cash at home is a bad idea?
During the recession, when everyone was terrified because banks were failing, many people believed their money was safer at home rather than at a bank. In actuality, this is not the case.
This is why:
- Your money is not making interest.
The best financial reason for not leaving cash at home is that it does not earn interest. The interest from a bank may not appear to be much, especially given the low-interest rates, but every little bit matters. So it is considerably preferable to keep your money in an FDIC-insured bank or credit union, where it can earn interest and be fully protected by the FDIC.
- You could lose it all in the event of a robbery or fire.
When it comes to insuring the loss or theft of cash within your house, renters and homeowners insurance often do not have significant limits. Therefore, you must evaluate your policy to determine your limit, which might be as low as $200.
If someone steals your secret cash, it is probably gone forever. Furthermore, you will not be paid unless you have a separate clause to cover such loss, which seems excessive to pay for only to keep cash in your home.
- You can lose it or throw it out by accident.
If you are particularly adept at hiding your rainy-day cash, it is incredibly easy to forget where you put it. The last thing you want to do is forget where it is or toss it out by accident.
Here is a real-life example for you to consider:
A woman in Tel Aviv gave her mother a new mattress and discarded the old one in 2009. The only problem was that the mother had stashed $1 million of her savings inside the previous one. So they now only have heartbreaking photographs of them digging through the trash for the million-dollar mattress.
The moral of the story is you should never hide money in locations you risk forgetting. Even if you believe you will remember it, someone else might locate your cash money or dispose of it by mistake.
Do you really need to store cash at home?
What is the rationale for storing cash at home? Do you think you will need it in the future? If you cannot think of an imminent cause – that is, a need within the next week or two – it is not required to keep cash on hand.
If you need cash to pay someone, evaluate whether you can offer the person a personal check or pay by credit card. These are significantly more secure alternatives than storing a wad of cash in your drawer. If you must keep cash on hand, keep it somewhere, you will remember, yet burglars won’t find it.
Also, if you certainly cannot avoid having stashed cash, think about the maximum amount of money to have at home.
