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Should You Keep Cash at Home?

(Hint: it is not a recommended practice during a volatile market, or at any other time.)

Stack of fifty dollar bills being stashed under mattress.
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While volatile financial times (inflation, recessions, and fluctuations in supply and demand) may cause some to feel as though the best place to store their money is under the mattress: it is not a recommended practice now, or at any other time. Here’s all your questions on handling cash during times of market instability, answered.

Why is it a bad idea to keep cash at home?

While it’s perfectly OK to keep some cash at home, storing a large amount of funds in your house has two significant disadvantages:

  • The money can be lost or stolen. Hiding cash under the mattress, behind a picture frame or anywhere in your house always carries the risk of it being misplaced, damaged or stolen. As careful as you may be, circumstances beyond your control may cause you to lose that money. For example, a dishonest worker in your home may find the cash and steal it, household pests might chew on the bills and render them unusable, or your cash-strapped teen might decide the money is there to pay for their own entertainment expenses. Unfortunately, there is no way to trace or reclaim lost or stolen cash.
  • The money isn’t growing. When cash doesn’t grow, it loses some of its value. This is especially true during times of rapid inflation: In June of 2022, the inflation rate soared to 9.1%. That meant that if you kept $1,000 at home for the next year and inflation remained at this rate throughout that time, your cash would be worth only $916.50 in one year’s time. Of course, if inflation rates increase, the loss would increase as well.

Where is the best place to keep cash?

In times of inflation, or market volatility, and anytime at all, it’s best to keep the money you don’t need for day-to-day expenses in a place where it can grow. This way, the growth will serve as a hedge against inflation. When inflation is lower, your funds can grow generously, especially if you keep the money in a savings vehicle for an extended period of time. Here are some places you may want to keep your cash at this time:

  • Savings accountsA high-yield savings account offers a safe and secure place to keep extra funds. When you open a savings account at a federal financial institution, there’s no risk of your money being lost or stolen. [Quorum for instance, is federally insured up to $250,000 by the National Credit Union Administration].
  • Real estate. The real estate market has experienced an explosion since the coronavirus pandemic and can be a great hedge against inflation for the savvy investor. Before going this route, though, make sure you have enough cash on hand to manage your property and cover any relevant expenses, such as property taxes, repairs and more. If you’re hesitant to invest in a physical property now, consider owning publicly traded securities instead, or a real estate investment trust (REIT). An REIT is a company that owns, operates or finances income-generating real estate for investors.
  • Precious metals. Precious metals, like gold, silver and platinum, have proven to hold their value even in times of inflation and a volatile stock market.
  • Term AccountsA term account (also known as a share certificate, and similar to a bank’s CD, or certificate of deposit) is a savings account that is federally insured and has a fixed dividend rate and a fixed date of maturity. The dividend rates of these accounts tend to be higher than those on savings accounts, and there is generally no monthly fee to keep the certificate open. The fixed dividend rate will remain unaffected by the national interest rate, which can fluctuate tremendously during times of high inflation.
  • I-Bonds: These bonds offer investors a fixed rate and variable inflation rate, designed to offer a guaranteed return and added protection against inflation. They can be purchased direct from the U.S. Treasury. As an added benefit, this investment is exempt from state and local taxes (interest is subject to Federal taxes), which provides extra incentive for investors.
  • U.S. Treasury bills: Treasury bills (or “T-bills”) are sold at a discount of the face value; you receive your money back on the specified maturity date. For example, you could purchase a $5,000 T-bill for $4,800, and at the maturity date, you would earn $200 from your investment. Like I-Bonds, this investment is exempt from state and local taxes, and can be purchased direct from the U.S. Treasury.
  • Whole life insurance: Life insurance is already a fundamental component of your financial planning, and some types of life insurance can provide an added savings element. Whole life insurance contracts, for instance, will provide cash value to the insured every month they make a premium payment.

Market volatility doesn’t mean it’s a good idea to hoard your cash at home. Follow the tips outlined above to find the perfect place to park your cash.

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CUNA 2023 diamond award trophy icon

CUNA 2023 Diamond Award Winner

Financial Education

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