How much money should you keep at home?

Physical money becomes less relevant as money management goes digital, but there is still a need to have a reasonable amount of money at home in an emergency.

Here is more information on how much money you should keep in the house, the risks involved, and how to keep your money safe.

Why do people keep money at home

Despite the ease of depositing money into a bank account and the assurance of FDIC protection, many people still keep some of their funds in cash. For some, it is less about keeping money and more about avoiding dealing with banks. A recent FDIC poll found that 36% of unbanked people – those who don’t have a bank account – don’t trust banks. Privacy concerns are also a major concern, which is understandable in a business environment regularly threatened by data breaches.

Others, however, may implicitly trust their banks but not the world around them. What if a hacker breaks into the payment system? What if a hurricane damaged the power grid? Having money at home can provide peace of mind if the unthinkable happens; you’ll still have money to buy essentials even if you don’t have access to your credit or debit cards.

How much money do you need to keep at home?

Elliot Pepper, CPA, CFP, MST, financial planner and co-founder of Maryland-based Northbrook Financial, says “a small but reasonable amount of money should be kept at all times.”

“The need for real money is less and less relevant, so a real saving of physical money is mainly there to provide protection in an extremely adverse scenario,” said Pepper, adding that the scenario is unlikely to be one. long-term position “. . “

“A sufficient amount of cash to cover bare necessities for two months might be a reasonable basis,” says Pepper. “This monthly amount would be lower than the monthly amounts used to calculate a traditional emergency fund, because it is really there to cover the bare necessities of an emergency.”

These basic necessities include a minimum payment for shelter, basic food, batteries, water, gasoline and basic necessities of life. However, Pepper says it might be wiser to keep these basics on hand instead of keeping cash to buy them. So, for example, rather than keeping $ 50 in the house to fill up with gas, maybe keep a reserve of gasoline or make sure your tank is always full.

“There is a difference between being an ‘over-the-world doomsday planner’ and a reasonably responsible planner,” says Pepper.

Where to keep money safe at home

Like any other piece of paper, cash can be lost, wet, or burnt. Consider purchasing a fireproof and waterproof safe for your home. It is also useful for storing other valuables in your home, such as jewelry and important personal documents.

The risks of keeping cash at home

Planning on putting cash in your house? Consider the disadvantages:

You don’t have FDIC insurance: When you deposit money at an FDIC-insured bank, you can rest assured knowing that your deposits will be protected and refunded up to $ 250,000 if the bank goes bankrupt. For credit unions, insurance is provided by the National Credit Union Administration. If, however, someone steals your money or you lose it, they are gone.

Some places will not accept it: As the coronavirus pandemic has forced us to reconsider what we touch, many merchants have switched to cashless and contactless transactions. They want credit cards, debit cards, and mobile payments to eliminate the spread of germs on greenbacks.

No earning potential: One of the main advantages of keeping cash in a bank account is that it can grow thanks to interest rates. If you keep your money in cash, it will never increase. Your $ 20 is still $ 20 a year later, and that same $ 20 is actually worth less due to inflation. The more you keep in cash, the more you run out of accrued interest.

Alternatives for keeping money at home

Pepper says the argument for keeping plenty of cash on hand is less compelling in 2021, as digital payment technology continues to make it easier to process money.

“From a security and administrative ease perspective, it’s so easy to process everyday purchases electronically. Plus, keeping the savings in an FDIC insured account provides a level of protection that is lost when the money is simply kept under the mattress, ”says Pepper.

Rather than storing money at home, you have several options:

Open another current account or high yield savings accountt: If you already have a bank account, consider opening another account at another bank or credit union to diversify where you keep your money. Say, for example, your main bank is hit by a power outage and its ATMs are offline. Your other financial institution may not be affected. If so, check that your new account doesn’t have a minimum balance requirement to avoid the fees of holding a small amount of money.

Deposit funds to a prepaid card: Rather than keeping money in physical bills, you can load a small amount onto a prepaid debit card to make sure you have cash available in an emergency. Federal law protects these funds if you have registered your prepaid card and someone steals the number. However, you must report the problem immediately. In addition, some prepaid cards may charge you a fee to replace a lost or stolen card.

Keep money in a PayPal account: While PayPal shouldn’t be a substitute for your primary bank account, you can keep money there. The platform offers convenient payment features and the ability to send money to friends.


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