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I was in the office of one of the investment companies and on the brochure they said that 13% of people keep money at home.

I wonder if there is a good reason to do that.

even if banks would fall the currency would follow, right?

Is there any good reason to do that? In what scenarios that might be a good idea?

  • 3
    Keep some money? Or literally keep all their savings in the house? Quite the difference. That implies a distrust of the entire financial system. – JTP - Apologise to Monica Nov 21 '11 at 2:46
  • @JoeTaxpayer it hard to tell, because of the way it was written in. but I bet if you keep money in the house you do not trust banks. – IAdapter Nov 21 '11 at 11:55
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    I trust the banks just fine, having $500 cash around is useful and I'm sure counts as "money at home", but it's more like "how much cash do you keep at home" as compared to keeping all one's money at home. I suppose one can phrase the question and draw conclusions as they wish. Without knowing the exact wording, how can you conclude anything? – JTP - Apologise to Monica Nov 21 '11 at 14:37
  • @JoeTaxpayer I don't understand, the brochure was trying to convince that you should invest in ... something. the interesting "fact" was that 13% of people keep money at home. maybe it was random "fact", but it got my attention. – IAdapter Nov 21 '11 at 22:38
  • @IAdapter In the context of an investment company, they were probably thinking more along the lines of older folks who keep their life savings in the sock drawer. – duffbeer703 Nov 22 '11 at 23:32
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It just takes a decent power outage to make it worth having some cash on hand. It's possible that worse things can happen as well -- things that would shut the financial system down or cause bank runs.

It is an assumption that you'll always be able to (a) access your money at your bank, either via teller transaction or ATM, and (b) pay with a debit card or credit card. If either (or both) of these abilities are taken away, you'll be glad you have some cash.

The amount that you have on hand (how much you want to hedge against these possibilities) is up to you.

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Houses burn down a lot more frequently than banks fail. Also, I'll bet the odds that FDIC will insure the loss of money in a bank is much higher than the odds of a homeowner's policy believing a huge pile of cash burned up in your house AND even then your policy probably wouldn't have coverage limits high enough to reimburse you for substantial cash losses.

Oh yeah, then there is theft, floods,etc.

The biggest danger is that routine inflation will eat up that money faster than the rats in the basement.

Now, having some cash for a small emergency on hand isn't a terrible idea, but using your closet as a personal bank doesn't seem very smart.

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Cash can be a lifesaver after a natural disaster.

I was in central Mississippi in 2005 after Katrina. There were a few things selling for cash only (generators for one). The banks opened pretty quick (1 day) where I was; south of me it took much longer (days or weeks).

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It's quite the contrary. If there are mass failures of banks, then the money supply will collapse and there will be vicious deflation, increasing the value of money held as cash. It's only if governments print money to bail the banks out that there's a (small) risk of hyperinflation and the effective collapse of the currency.

  • so its safer to keep money in gold? – IAdapter Nov 21 '11 at 11:56
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    Nonsense. Financial panics have taken place in the past where banks were ordered closed to prevent further panic. The world didn't collapse. – duffbeer703 Nov 21 '11 at 23:04
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(in response to last comment to me) Ok. I understand now. Forgive me if I appeared to be splitting hairs. When it comes to understanding, exact wording is important. I keep money at home, enough to not be a frequent ATM user, not enough to imply any distrust of the banking system or preparation for Armageddon. You last comments implies the brochure said 13% keep all their money at home, i.e. have no banking relationship. A recent poll concluded 25% of people had less than $2500 available if they had an issue, such as the need to repair a car, or furnace. From that factoid, it wouldn't surprise me that half of those people have no bank acount at all. Not for lack of trust, but lack of money to deposit.

  • I suspect a key reason some people don't have bank accounts is that they are trying to hide their unreported and/or illegal income. So if the OP is trafficking drugs or not claiming income, that might be a logical (though immoral) reason to not use a bank. – JohnFx Nov 23 '11 at 0:10
  • John - I don't know either way, but wouldn't Tony Soprano want to have a regular bank account as well for the legitimate businesses? And a way of justifying income to support having the house and car? This in addition to the wads of cash in the safe, of course. – JTP - Apologise to Monica Nov 23 '11 at 1:21
  • Now there's an idea. Hide it in the duck food bin. – JohnFx Nov 23 '11 at 14:02
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I think that its ok to keep your "emergency fund" money in cash in your home. By emergency fund, I mean $1,000-2,500, that doesn't get touched.

There are risks. You have a risk that the money will be stolen, or be wholly or partially destroyed, or even lost if you stash it somewhere and forget. You're also not going to earn interest.

So go for it. But keep your emergency funds in cash -- if you want to buy silver and gold, that's fine...you need to treat them as commodity investments.

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