25 Oct

Why Keep Money in Cash Rather than in a Bank Account?

Why should one keep his money in cash rather than in a bank account?

Written By Dom Mia
October 25, 2023

Posted at 18:36h in Cashback by Dom Mia

Keeping some cash at home can be beneficial in certain situations. It serves as a precautionary measure in case of a natural disaster or emergency when access to ATMs and card payment options may not be available. While it is important to have a cash reserve, it should be kept to a small sum to ensure that the advantages and earning potential of bank accounts and investment accounts are not missed.

Storing cash at home can provide peace of mind, especially when combined with other emergency supplies. The amount of cash to keep at home depends on factors such as family size and daily expenses. However, there are also risks associated with keeping cash at home, such as the possibility of theft and the lack of interest earnings. Banks and credit unions offer protection against theft and provide deposit insurance in case of a financial institution collapse. It is recommended to keep everyday bills and larger savings in bank accounts, while utilizing cash for emergencies and basic needs.

Key Takeaways:

Keeping cash at home can be beneficial in emergencies when access to ATMs and card payment options are not available.
Storing a small cash reserve at home provides peace of mind and is a precautionary measure.
Keeping everyday bills and larger savings in bank accounts offers protection against theft and provides interest earnings.
Family size and daily expenses are factors to consider when determining the amount of cash to keep at home.
Banks and credit unions offer safeguards against theft and financial institution collapse.

The Risks of Keeping Cash at Home

While keeping cash at home can provide a sense of security, it is important to be aware of the risks associated with this practice. One of the main risks is the possibility of theft. Storing a large amount of cash at home can make you a target for thieves, and the chances of recovering stolen cash are low. In contrast, bank accounts offer protection against unauthorized transactions and provide liability limits in case of theft.

Another drawback of keeping cash at home is that the money won’t earn interest. Money stored in a bank account can earn interest, helping it grow over time. By keeping cash at home, you miss out on the opportunity to make your money work for you. Additionally, cash can deteriorate over time, especially in areas prone to flooding or high humidity. This can lead to damage or loss of your hard-earned money.

To mitigate these risks, it is important to consider alternate options for storing and growing your savings. Banks and credit unions offer safeguards against theft and provide deposit insurance in case of a financial institution collapse. By utilizing bank accounts and investment accounts, you can take advantage of the potential to earn interest and generate greater returns on your money.

How Much Cash to Keep at Home

When it comes to determining how much cash to keep at home, there are several factors to consider. One important consideration is the size of your family. A single individual may only need a small cash reserve for emergencies, while a larger family with multiple dependents may require a more substantial amount to cover expenses during a crisis. Take into account the number of people relying on you and their daily needs when deciding on the appropriate cash reserve.

In addition to family size, another factor to consider is your daily expenses. Take a careful look at your regular expenditures, such as food, transportation, and other essentials. This will help you estimate how much cash you might need to have on hand in case of emergencies. It’s a good idea to create a budget and determine the minimum amount required to sustain your family for a short period without access to banks or other financial institutions.

Remember, it’s essential to strike a balance between having enough cash for emergencies and utilizing the benefits offered by bank accounts and investment accounts. While keeping some cash at home provides peace of mind, it’s also important to take advantage of the earning potential and security offered by financial institutions. Consider keeping the majority of your savings in an emergency savings account, where it can earn interest and be protected from unforeseen events.

In summary, the amount of cash to keep at home varies depending on your family size and daily expenses. It’s recommended to maintain a small cash reserve for emergencies while utilizing bank accounts for larger savings. By finding the right balance, you can ensure that you have access to cash when needed while also maximizing the benefits of traditional financial institutions.

The Benefits of Having Cash and the Disadvantages of Bank Accounts

After considering the advantages and drawbacks of keeping money in cash versus using bank accounts, it is clear that there are benefits to having some cash on hand. Storing a small cash reserve at home can provide a sense of security and serve as a backup during emergencies. In times of natural disasters or when access to ATMs and card payment options is limited, having cash readily available can be extremely helpful.

However, it is important to note that cash should be kept to a small sum to ensure that the advantages and earning potential of bank accounts and investment accounts are not missed. Bank accounts offer protection against theft and provide deposit insurance, giving peace of mind that cash stored at home cannot offer. Additionally, money stored in a bank account can earn interest, helping to offset inflation and increase savings over time.

While there are risks associated with keeping cash at home, such as the possibility of theft and the lack of interest earnings, these risks can be mitigated through proper security measures. Banks and credit unions provide safeguards against unauthorized transactions and offer liability limits in case of theft. By striking a balance between having a small cash reserve for emergencies and utilizing bank accounts for larger savings, individuals can take advantage of both the benefits of cash and the advantages offered by bank accounts.

In conclusion, the decision of whether to keep money in cash or in a bank account depends on personal circumstances and financial goals. Having some cash at home can provide peace of mind and act as a precautionary measure. However, it is essential to take advantage of the benefits offered by bank accounts, such as interest earnings and protection against theft. By considering these factors and finding the right balance, individuals can make informed decisions about how to manage their finances effectively.

FAQ

Why should I keep money in cash rather than in a bank account?

Keeping some cash at home can be beneficial in certain situations, such as during a natural disaster or emergency when access to ATMs and card payment options may not be available. It serves as a precautionary measure in case of such events.

What are the risks of keeping cash at home?

One of the main risks is the possibility of theft. Storing a large amount of cash at home can make you a target for thieves, and the chances of recovering stolen cash are low. Additionally, keeping cash at home means that it won’t earn any interest, unlike money stored in a bank account.

How much cash should I keep at home?

The recommended amount of cash to keep at home varies depending on various factors, such as family size and daily expenses. It is generally advised to keep a small cash reserve at home for emergencies and utilize bank accounts for larger savings. The specific amount will depend on your individual circumstances.

What should I do with the rest of my savings?

It is recommended to keep the rest of your savings in an emergency savings account or invest in bank accounts or investment accounts that offer the potential for earning interest or greater returns.