A recent survey found that one in ten Brits admits to hiding cash under their bed.
Despite the global movement to a more cashless society, technical glitches at banks and Visa may have made even more people believe they need some emergency cash stashed in the home. This thinking is reinforced with a survey conducted this year that showed 80% of people now keep some emergency cash at home, with 10% holding between £200 and £500 in cash, and 4% keeping even more.
It’s an understandable stance, but not necessarily a good idea.
Here’s just a few of the problems with hiding money at home that you might want to think about.
It might get stolen
Not all home insurance policies provide cover for cash and those that do often cap the amount they will protect in the home at between £500 and £1,000.
That means that if it was stolen by burglars you might not be able to make a claim and get the money back.
Research found that the very best home insurance for cash protected up to £10,000 in the home. However, that’s very rare to find and still a long way off the £85,000 protection you get from FSCS on money in a bank, building society or credit union.
It might be destroyed
Burglars aren’t the only risk if you’re hiding cash at home; it could also be lost to fire or flooding.
Of course, we all hope that our homes won’t be hit by any kind of disaster like that but it does happen – that’s why people take out home insurance.
So, if you’re hiding a serious wad of cash in the home then it’s at risk. And, just as with burglars, you’re very likely to find it’s not insured.
Banks and building societies may not be paying out record rates of interest at the moment, but at least they are paying something.
Money hidden under your mattress is simply devaluing all the time at the rate of inflation. This means that it’s likely you won’t be able to buy as many things with that same amount cash when you come to use it. In August, official figures show that inflation hit a six-month high of 2.7%, before falling to 2.4% in September.
But unless inflation falls by a heck of a lot more than money held in the home is just worth less and less over time.
One of the reasons people are keeping cash at home is that they are worried that a banking glitch will leave them unable to make the purchases they need to.
It’s a fair point. It’s incredibly inconvenient when you can’t use your card or withdraw cash. But having money stored at home is not that much more helpful. You can’t move it rapidly from one account to another to meet the cost of an unexpected bill.
Should you need to get that money into a bank account, you’re going to need to take the money and travel to the bank in person.
It’s hard to hide cash
You might think you know the perfect hiding spot for your money but the truth is that most people pick the same places. And thieves know that.
Underwear drawer, under the mattress, at the back of the breadbin, at the bottom of a cupboard, taped to the side of the toilet cistern: burglars know about all these places.
And if you do manage to hide it well, in some secret spot that thieves will never look in, then you come up against the next danger – you might forget where it is!
It might be chucked out by mistake
How often do you read about people donating a teapot to a charity shop, only for the charity shop to discover that it’s stuffed with bank notes? Or an old coat, only for the shop’s volunteers to find it has notes sewn into the hem?
People accidentally throw away their wealth all the time and the more carefully you hide it at home, the greater the risk it will be chucked out.
It has to leave the house eventually
If you’re keeping large amounts of money at home, it’s probably because you intend to take it and use it at some point.
But that can be very risky too, walking around with large sums of cash puts you at danger of pickpockets or muggers. And home insurance policies that protect cash at home often provide even less cover when you take it out of the home. It’s worth checking your policy.
Cash that’s held in a bank account can be transferred safely and securely, with no unsafe walk with pockets full of cash.
Put your money in a really safe place
It’s much safer to store your cash in a bank, building society or a credit union. You can access it when you need it with a contactless card, G Pay or Apple Pay, but the biggest difference is that it can’t get easily get stolen or lost, or even washed.
For additional security, the Financial Services Compensation Scheme (FSCS) protects up to £85,000 of your savings. So even if something happened to that financial institution, FSCS would compensate you within seven days – automatically – you wouldn’t even need to fill in a claim form. And it’s 100% free.
It only applies to FSCS protected firms, so you should check any financial company is covered before you move your money.
FSCS also protect financial products like mortgages, pensions and insurance (amongst many other things), so if you decide to use the cash stored at home to add to your pension or mortgage, make sure they are protected too.