Geopolitical tensions are currently high worldwide, with uncertain economic prospects and China’s economy facing difficulties. Meanwhile, natural disasters and human-made calamities continue to occur, such as wars, earthquakes, tornadoes, and floods, prompting many people to stash some cash at home.
While having some cash on hand for emergencies is crucial, where you store that cash is also important. Some people hide large amounts of cash in inconspicuous places at home, but experts warn that this habit may lead to problems in the future.
According to a report by CNBC, based on a new survey conducted by the financial management app Piere, the average household in the United States holds about $544 worth of cash, coins, paper money, or precious items like gold bars. The website surveyed 1,500 American adults at the end of January and beginning of February.
Periods of economic uncertainty often lead people to hold more cash. However, experts advise against holding excessive amounts of cash.
When asked where they keep cash at home, approximately 10% of respondents said they store it in a safe or safe deposit box, which is the most popular choice.
Other locations are less conventional. Yuval Shuminer, founder and CEO of Piere, stated that about 6% of people hide cash in secret compartments, such as “a false drawer that cannot be seen.”
Another 6% of respondents said they stash money under or inside the bed, mattress, or pillows, while 5% store cash in the refrigerator or freezer. A small percentage of those surveyed mentioned hiding money in decorations, vases, or containers (4%), or under the floor or carpet (3%).
Storing cash at home comes with risks and doesn’t provide any returns. Shuminer points out that you may also miss out on potential high-interest earnings or stock market returns.
Holding too much cash at home can pose several issues. Firstly, your homeowner’s insurance policy may not fully protect the entire amount.
Shannon Martin, a licensed insurance agent and content contributor for Bankrate, explained that cash and similar items often fall under special limits categories, meaning the coverage limit is a set amount determined by the insurance company.
Bankrate found that most homeowners’ insurance policies have a coverage limit of $200 for replacing cash, coins, and precious metals.
Some insurance companies offer higher limits. Martin suggested inquiring with your insurance agent about adding endorsements to increase the coverage limits, provided you can prove substantial funds in your home.
“If you try to file a claim for $10,000 cash tucked in your mattress, you may run into problems,” she said.
Money deposited in federally insured accounts is safer. Funds in bank checking accounts, savings accounts, CDs, money market deposit accounts, individual retirement accounts, and certificates of deposit are protected by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, regardless of whether the bank goes bankrupt, ensuring customers can retrieve their deposits.
“If you have money in the bank, the bank has insurance,” Martin emphasized. “If something happens to the cash in your home, you’re only going to get what’s listed on your policy.”
Not only is it challenging to recover lost or stolen cash, but money lost due to natural disasters is irretrievable. Lee Baker, a registered financial planning professional and founder of Claris Financial Advisors in Atlanta, noted that if your home with a large amount of cash is affected by a fire, for instance, “that cash is likely gone now.”
However, it’s reasonable to keep some cash at home.
“I lived through a hurricane where the power was out for a long time, and ATMs weren’t working,” said Carolyn McClanahan, a registered financial planning professional and founder of Life Planning Partners in Jacksonville, Florida, and a board member of the CNBC Advisor Council.
She emphasized that at times like those, “cash is king.”
Baker concurred, stating, “having enough cash to cover a day or two’s expenses is actually wise.”
In addition to stashing cash in drawers, bookshelves, and secret compartments, there are three other places recommended for storing emergency funds:
Experts advise keeping enough money in your checking account to cover a month’s worth of bills. Any excess should be placed in a savings account, preferably a high-yield savings account.
Funds earmarked for medium to long-term goals often fare better with investments, as inflation can erode your savings’ value.
To prepare for emergencies, Baker recommended having enough money in a “personal finance kit” at home to cover a day or two’s expenses, ensuring quick access to funds in case of emergencies like fires.
Martin suggested considering storing this kit in a fire and water-resistant safe.
Baker stressed the importance of keeping the cash in a single location at home, ensuring that family members are aware of its whereabouts, whether in a safe or another place.
“I don’t encourage spreading emergency funds around too many places,” Baker said. “Simplicity is needed in emergencies.”
(Note: This article is for general informational purposes only and does not constitute financial advice. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal financial advice. For specific investment matters, consult with your financial advisor. The Epoch Times is not liable for any investment responsibilities.)