Should you stash some cash in a hiding place around your house?
It can seem like a fun, creative way to save your money — hundreds stuffed in the bottom of a cookie jar, fifties stuck between the pages of a book, even more money buried in the back yard. But it is actually a dumb and unsafe way to hold on to your money.
Here are several reasons why hiding cash around the house is a bad idea:
1. You are missing out on ‘free’ money
Putting money in an interest-paying bank account enables it to grow. By keeping your money in cash, you are missing out on interest — free money, basically.
Around 1 in 4 FDIC-insured savings accounts now pays an annual percentage yield (APY) of at least 2%, as we recently reported in “Why 69% of Americans Are Missing Out on Free Money.”
That 2% adds up, but your money will earn nothing if you are hiding it at home.
2. The money is not FDIC-insured
When you deposit money at a bank that is backed by the Federal Deposit Insurance Corp., your money is insured by the FDIC. This independent federal agency insures deposits for at least $250,000.
You have none of that protection if your money is stuffed in a mattress.
To find out whether a particular institution is FDIC-insured, use the agency’s BankFind tool.
3. You could lose the money
You might not hang on to your hidden money for as long as you’d think. You could lose it to fire or theft, or you could forget where you hid it.
Jason Speciner, a certified financial planner at Financial Planning Fort Collins in Fort Collins, Colorado, advises keeping on hand only enough cash to cover about one week’s worth of living expenses — and storing it in a fire-proof safe.
“This is especially important if you live in an area that is prone to natural disaster like an earthquake or hurricane which may displace you and/or knock out infrastructure,” Speciner tells Money Talks News.
4. The money might not be covered by your home insurance policy
Homeowners and renters insurance policies generally offer little protection for cash hidden around the house, says AnnaMarie Mock, a certified financial planner at the Highland Financial Advisors in Wayne, New Jersey.
She tells Money Talks News:
“Renters and homeowners insurance will typically insure a very small amount of cash in the event of it being stolen or destroyed. The limits will vary based on policies, but it can be as low as a couple hundred dollars.”
5. You are losing out to inflation
By not putting your cash in a bank account where it can earn interest, you will be harder hit by inflation. In fact, your cash is certain to lose buying power over time.
Say you hid $1,000 around your house a decade ago, in January 2009. According to the Bureau of Labor Statistics’ inflation calculator, that grand would have the same amount of buying power as $1,213.13 in June 2019.
In other words, your hidden cash can’t buy as much today as it could when you hid it. But putting money in a savings account will help counteract this costly effect of inflation.
6. A loved one might get stuck searching for hidden money
Family and friends will have enough to worry about when you die. Don’t add to their stress by leaving money stashed around your home — leaving them to hunt for it.
Krista Cavalieri, owner of Evolve Capital in Columbus, Ohio, was working as a bank teller when a woman brought in an unusual deposit. A family member had hidden money all over the house, and the woman had been searching for it.
“She never knew it was there, and there was no record of where all the money even was,” Cavalieri recalls. “So, she had no idea if she got it all.”
Have you ever hidden money around the house? Let us know why by commenting below or on our Facebook page.