I recently read a fascinating article on CNBC that discussed the various places that people hid cash at home. Some people put it in a freezer, some people put in a sock drawer, a box, envelopes that they hide, etc. There is nothing wrong with having a little cash at home, particularly if you are going to an all-cash budget like the envelope system or want a little in case of emergencies.
I fully admit I keep a few hundred dollars socked away in a place in my house just in case of an emergency where ATMs or somethings might be down for days.
What struck me about this article and others that I have is that amounts of money people are stashing in their homes. Not only are they hiding small amounts of cash, but hoarding large amounts.
Of course some of this is understandable. The financial crisis a few years ago scared a lot of people. A lot of people lost lots of money. Cash is tangible. Cash is king. You can touch it, feel it, and it has immediate power that is there. Hell, according to some figures, corporations are hoarding over 2 TRILLION dollars in cash right now for a variety of reasons.
But hiding and hoarding that much cash is, in my opinion, dangerous.
YOU COULD GET ROBBED
It is dangerous first and foremost because if you god forbid your house gets burglarized you obviously lose that money. That money is gone and it doesn’t have the same kinds of protections if you put it in a bank. At least the money in the bank is insured.
YOU ACTUALLY LOSE MONEY IN THE LONG-RUN
Not only could you literally lose that money by your home being burglarized, but you get a terrible rate of return by just keeping it in your home. Inflation is running about 2-3% right now. If you keep all of that money in your home and just want to have it around it loses its purchasing power. By not putting it in a place where it can at least earn some interest that $1.00 will be only worth $.97 next year and so forth. Cash maybe king, but it can certainly lose its value if it isn’t working for you.
YOU DON’T CHANGE YOUR FINANCIAL HABITS
The truth is that if any one of us wants to have some kind of decent savings down the road we are going to have to put it somewhere where it can earn some kind of interest or return. Whether that it is investing in mutual funds, bonds, precious metals, commodities, or other items money needs to be deployed in some way to get enough of it back for you to not only maintain its purchasing power, but to increase wealth for the future.
By not deploying that money for greater gains, I think that we continue to perpetuate bad financial habits. Certainly, you are saving, but saving should be done for a purpose ,not for savings sake. Most of the time when I am hearing about saving it is for a long-term goal like buying a house or some form of financial independence and/or retirement. Keeping all of that cash under a mattress only stops you from learning, investigating, and even trusting the marketplace.
I have heard from so many of my friends that the stock market is a casino. It is a casino. Everything is rigged. You can’t get a head. Frankly, I hate that kind of thinking. I think it is misguided, full of conspiracy theories and just plain wrong. Sure is some of the financial market juiced up by others? Sure it is. But in general it is still the best way for people to try to achieve financial independence.
People spend more money on the lottery then they do saving for future goals. Your odds at winning the lottery are millions to one, but for over two hundred years that stock market has gained just over 10%. Those odds are much better. It isn’t a sure bet that you will make money in one year or even that you will make 10%, but as far as I know the story is still the same: The TORTOISE ALWAYS WINS THE RACE! By Hoarding cash, hiding it and sticking it in your mattress you aren’t even participating in the race and continue to perpetuate bad financial habits that won’t serve you in the long-run.
Keeping a little cash at home for an immediate emergency or to go grocery shopping or an all-cash budget is one thing. But having large amounts (e.g. thousands of dollars) in your home just doesn’t make any sense to me.
I say take that money at least to a bank, open a savings account, at least get the FDIC protection and if you are bolder begin to dip your toe in deploying your money for the long-term. My preference would be to invest in the stock market, but at the very least start saving for a purpose and not just to have cash on hand.
Do you hide and/or hoard a lot of cash? Why?