How Much Cash Do You Need To Keep At Home?

In an emergency, keeping a small amount of cash at home is a good idea. But a savings account is a better place for most of your money because it protects your deposits and allows you to make interest.

Nowadays, most purchases can be done with a digital wallet, debit card, or credit card, but cash is still useful for some things. If a disaster happens and credit cards aren’t accepted, cash might be the only way to pay, so you should be ready.

It’s a good idea to keep some cash at home in an emergency, but keep the amount small so you don’t miss out on the security and earning potential that bank accounts and savings accounts offer. Here are some reasons to keep cash at home and things to consider when choosing how much to keep.

Why You Should Keep A Little Cash At Home

Keeping cash at home is a good safety step that can help ensure your family has money to fall back on if you can’t get to an ATM because of a natural disaster or other situation. Even though you shouldn’t keep all your savings at home, you should have some cash and survival items like extra water, candles, first-aid kits, and canned food.

How Much Cash Do You Need To Keep At Home??

Ready.gov says you should keep a small amount of your savings at home and put the rest in a savings account for emergencies. How much you should save at home depends on how many people you have and how much you spend each day. During a disaster, a single person might need a few hundred dollars, but a family of four might need more to pay for food, gas, and transportation.

What Are The Dangers Of Having Cash At Home?

Even though it’s smart to keep some cash at home, it’s riskier than having money in a bank or savings account. What you need to know is this:

Lost Money Is Hard To Get Back.

If you keep a lot of cash in your house like people did during the Great Depression, you could be a target for theft. If someone steals your money, it will unlikely be returned. Only 2.6% of the $1.4 billion in cash and banknotes that were reported stolen in 2019 was found, according to FBI statistics.

On the other hand, bank accounts help prevent theft in some ways. Suppose someone takes your money by making illegal transactions on your bank account. In that case, you’re only responsible for a portion of the stolen funds (if any) if you report the fraud immediately. Setting up account alarms will assist you in keeping track of what’s going on with your account so you can report suspicious transactions immediately and limit your losses.

Furthermore, banks and credit unions sponsored by the Federal Deposit Insurance Corporation provide deposit insurance that covers up to $250,000 per saver, per account ownership type, if a financial institution fails. So, if you’re worried that your money will disappear during a bad economy, the government has taken steps to protect your assets.

Money Stashed At Home Will Not Earn Interest.

Aside from the risk of theft, putting money in the back of a room means you might miss out on earnings. Money in a savings account can make interest, and money put in the market could earn an even bigger return that keeps up with inflation. Instead of keeping your extra $5,000 cash at home, you invest it and get a 6% return each year.

In ten years, $5,000 would be worth $8,954.24. During those 10 years, the prices of goods and services also increased. Your interest on your account will help your money last longer when needed. If you leave a lot of money at home and don’t make any money off it, your buying power will decrease over time as inflation increases.

Cash Can Get Old.

Keeping money at home can be dangerous because it can get lost or broken. Even though cash is tougher than printer paper, it can still be torn, rot, or grow. This could be a big problem if you are located in a place that often floods or has a lot of humidity.

Where Do You Want To Keep Your Money?

A safe or lockbox is an excellent spot to keep cash at home in emergencies or tragedies. But money for bills and other regular expenses is usually safer in a bank account. Certificates of deposit (CD) and high-yield savings accounts are good places to put emergency savings and money you save for a big purchase or event.

401(k)s and IRAs offer tax benefits and investment choices that could give a higher return over the long run than bank accounts for retirement savings. Taxable trading accounts are savings accounts that don’t have the same tax benefits as 401(k)s and IRAs but also have fewer rules. For instance, you can put as much money as you want into a tax-payable account each year.