What if the money that had been saved for so many years just disappeared overnight? Many people had ended up keeping large amounts of money at home, feeling that this was the most convenient and safe option available to them until something went drastically wrong.
Although the ability to keep some money on hand in an emergency can prove convenient, the collective experiences compiled online expose a trend: the danger of home cash holdings is much greater than one generally would think. Whether it is a natural disaster or the quiet nibbling of inflation, these examples demonstrate why a “home bank” can prove a negative experience, and why other options might offer something better. Here are nine lessons why.
1. Fire Converts Savings into Ashes
Some residents described how home fires resulted in a complete loss of life savings that had been kept inside. A lack of documented evidence of the money existing meant that claims related to housefires went unreimbursed. Even fire-resistant safes can give way under extreme conditions, and some residents, responding to the 2017 Santa Rosa fires, discovered that some of the safes designed and advertised as “fire resistant” did not meet expectations regarding exposure to heat. Temperatures that can destroy bills start at 387°F and go up to 451° for auto-ignition points.
2. Floodwaters Wipe Out Emergency Funding
Floodwaters can immediately damage paper currency, particularly if the funds are stockpiled in envelopes or drawers. Water can cause the paper to warp, discolor, or even merge together, making the money unusable. This can happen even when the funds are sealed in a bag, even if it’s in a humid climate, where mildew can build up. One must periodically drain the humidity that has built up in waterproof safes. This has been known to be ignored for those at home.
3. Thieves Know Hiding Spots
Burglars are very familiar with typical hiding spots like mattresses, freezers, and closet areas and even under floorboards. In a survey, about 6 percent of respondents admitted to keeping money in their beds or freezers, while 3 percent hid money under their carpets. These are areas thieves immediately begin searching once they gain entry into houses. Cash values are limited by home insurance policies to about $200.
4. Inflation is Steadily Red
Money at home loses value each and every year. Comparing the years 2003 and 2023, the cost of an average new automobile rose by nearly 100% almost doubling from $24,773 to $48,808. Additionally, the current interest rate for high-yield savings accounts is at 4% APY, and the historical returns on the stock market are 10.58%. “Hidden cash” is losing money at 0% and is being left in the dust compared to those saving and investing.
5. Forgetting the Hiding Spot
It sounds unbelievable, but many people have misplaced their own cash. In the course of rapid moves or renovations, hidden envelopes have been tossed away or forgotten. In one case brought to light through an online account, a landlord dispute led to an abrupt relocation, and the tenant subsequently realized that thousands of dollars were left hidden in the former abode.
6. No Access When Away
“Home” money can be useful only if the person who owns it is there too. This has happened to travelers, to workers in distant offices, who have found themselves in emergency situations with no money in their pockets simply because their own money was in the drawer back home. Money in an FDIC-insured institution can be reached from anywhere.
7. Pets and Pests Can Destroy Bills
Dogs have been known to gnaw through bundles of money, and rodents have been seen to shred money to make nests. Insects could also damage the savings over time. Without precautions, paper money is just another potential object to gnaw on or use for nest-building to the animals that share the home.
8. Larger Cash Losses Are Not Usually Covered Under Insurance
Even with homeowners or renter’s insurance, cash claims are limited. The policy will only usually go up to a few hundred dollars to replace cash that has been stolen or lost. This can be problematic, as, as Bankrate’s Shannon Martin said, “If you are trying to make a claim for $10,000 in cash that you have stuck in your mattress, I’m pretty sure there will be a lot of questions about that.”
9. Safer Alternatives Offer Protection and Growth
Other options like high-interest savings accounts, short-term CDs, and money market funds also offer interest and protection. A savings of $2,000 at an APY of 4% can earn approximately $7 per month. There is potential for loss when money is stored physically. Investing in precious metals, U.S. government securities, or properties can help without the risk of physically stored money. In all the regret-filled tales of home cash losses, the one common element that runs through all these experiences is the fleeting nature of the safety that one feels when reality hits.
Although the practice of maintaining a home emergency stash might not be the worst idea, the risks associated with home cash savings, including theft, disasters, and devaluation, make the idea of using the same as the primary savings mechanism rather impractical, to say the least.
