Forum: money.stackexchange.com
Tags: <banking><home>
Title: Keeping money at home
Question: 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?

Answers:
sents: text: It just takes a decent power outage to make it worth having some cash on hand.
text: It's possible that worse things can happen as well -- things that would shut the financial system down or cause bank runs.
text: 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.
text: If either (or both) of these abilities are taken away, you'll be glad you have some cash.
text: The amount that you have on hand (how much you want to hedge against these possibilities) is up to you.
answer_details: author: money.stackexchange.com/users/414/mbhunter
score: 13
sents: text: Houses burn down a lot more frequently than banks fail.
text: 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
text: even then your policy probably wouldn't have coverage limits high enough to reimburse you for substantial cash losses.
text: Oh yeah
text: , then there is theft, floods,etc.
text: The biggest danger is that routine inflation will eat up that money faster than the rats in the basement.
text: 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.
answer_details: author: money.stackexchange.com/users/149/JohnFx
score: 10
sents: text: Cash can be a lifesaver after a natural disaster.
text: I was in central Mississippi in 2005 after Katrina.
text: There were a few things selling for cash only (generators for one).
text: The banks opened pretty quick (1 day) where I was; south of me it took much longer (days or weeks).
answer_details: author: money.stackexchange.com/users/4605/Eric
score: 4
sents: text: It's quite the contrary.
text: 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.
text: 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.
answer_details: author: money.stackexchange.com/users/2325/Mike Scott
score: 2
sents: text: (in response to last comment to me)Ok.
text: I understand now.
text: Forgive me if I appeared to be splitting hairs.
text: When it comes to understanding, exact wording is important.
text: 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.
text: You last comments implies the brochure said 13% keep all their money at home, i.e. have no banking relationship.
text: 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.
text: From that factoid, it wouldn't surprise me that half of those people have no bank acount at all.
text: Not for lack of trust, but lack of money to deposit.
answer_details: author: money.stackexchange.com/users/187/JTP - Apologise to Monica
score: 1
sents: text: I think that its ok to keep your "emergency fund" money in cash in your home.
text: By emergency fund, I mean $1,000-2,500, that doesn't get touched.
text: There are risks.
text: 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.
text: You're also not going to earn interest.
text: So go for it.
text: But keep your emergency funds in cash -- if you want to buy silver and gold, that's fine...
text: you need to treat them as commodity investments.
answer_details: author: money.stackexchange.com/users/1288/duffbeer703
score: 1

Summary of the answers:
Having some cash on hand at home can be a lifesaver in a disaster. However, houses burn down more often than banks fail. You could keep an emergency fund at home in cash.
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.  It just takes a decent power outage to make it worth having some cash on hand. Cash can also be a lifesaver after a natural disaster.  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. But there is a risk: Houses burn down a lot more frequently than banks fail. You also have the risk that the money will be stolen, or be wholly or partially destroyed, or even lost if you stash it somewhere and forget, but the biggest danger is that routine inflation will eat up that money faster than the rats in the basement. Also bear in mind that the odds that the 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 has been burned up in your house. It might be a good idea to keep your "emergency fund" money in cash in your home, but using your closet as a personal bank doesn't seem very smart.