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Have you ever considered keeping a stash of cash hidden somewhere in your house? Maybe under the mattress, in a sock drawer, or inside that fake can of beans in your pantry? While having some cash on hand might seem like a smart move for emergencies, there are actually some serious downsides to storing significant amounts of paper money at home. Let’s dive into the disadvantages and risks you might not have considered.
Why People Keep Cash at Home in the First Place
Before we talk about the disadvantages, it’s worth understanding why many folks choose to keep cash at home
- Emergency preparedness – Having cash during power outages, natural disasters, or when you can’t access ATMs
- Privacy concerns – Some people worry about data breaches or hackers accessing their bank accounts
- Mistrust of banks – According to FDIC surveys, around 36% of unbanked individuals simply don’t trust financial institutions
- Budget management – The popularity of “cash-stuffing” or envelope budgeting methods
- Banking limitations – Some individuals have been denied bank accounts or run cash-based businesses
The Major Disadvantages of Storing Paper Money at Home
1. No Insurance Protection
Perhaps the biggest disadvantage is the lack of insurance for your home-stored cash:
- Limited coverage: Most homeowners’ or renters’ insurance policies typically only cover around $200 in cash.
- No FDIC protection: Unlike money in a bank account, which is insured up to $250,000 per ownership category by the FDIC (or NCUA for credit unions), cash at home has no such protection.
2. Risk of Theft
This one’s pretty obvious, but worth emphasizing:
- Cash is the ultimate target for burglars – it’s untraceable and immediately usable
- Even if you think your hiding spot is clever, experienced thieves know all the common hiding places
- The more cash you keep, the bigger target your home becomes
3. Vulnerable to Damage or Destruction
Paper money is, well… paper! And paper is surprisingly fragile:
- Fire damage: Even a small house fire can destroy your life savings in seconds
- Water damage: Floods, burst pipes, or even high humidity can ruin cash
- Pest damage: Rodents, insects and other critters might decide your money makes good nesting material
- Accidental damage: Something as simple as spilling coffee or accidentally throwing it away happens more often than you’d think
4. No Growth Potential
When money sits idle at home, it’s actually losing value:
- No interest earned: Unlike funds in a high-yield savings account, your cash at home earns absolutely nothing
- Inflation erosion: That $1,000 under your mattress will have less purchasing power each year due to inflation
- Missed investment opportunities: Money that could be working for you is just sitting there doing nothing
As Elliot Pepper, a CPA and financial planner, points out “The more money you keep in cash, the more you miss out on accruing interest”
5. Tracking Difficulties
Managing cash stashed around your home creates practical challenges
- Hard to track spending: Unlike digital transactions that create automatic records
- Difficult budgeting: You might lose track of exactly how much you have
- No documentation: For tax purposes or disputes, you’ll have no proof of transactions
6. Limited Acceptance
In our increasingly digital world:
- Many businesses, especially since the COVID-19 pandemic, have shifted to cashless transactions
- Some places simply won’t accept cash payments anymore
- Online purchases typically require electronic payment methods
7. Psychological Impact and Temptation
Having cash readily available can create unexpected psychological effects:
- Impulse spending: When cash is easily accessible, you might be more tempted to spend it
- Anxiety: Constantly worrying about the safety of your money can cause stress
- False sense of security: Having cash on hand might give you an unrealistic feeling of financial stability
How Much Cash Should You Actually Keep at Home?
Despite the disadvantages, having some cash at home does make sense for emergencies. But how much is appropriate?
According to experts, a reasonable amount might be:
- Enough for bare necessities for 1-2 months in case of extreme emergencies
- Based on the Bureau of Labor Statistics, the average monthly cost for food and gasoline is approximately $1,000
- Adjust based on your household size and local cost of living
Many financial experts recommend keeping no more than $1,000 in cash at home. Anything beyond that is probably better off in a bank.
Safer Alternatives to Storing Large Amounts of Cash at Home
If you’re concerned about having access to your money, consider these alternatives:
1. Multiple Bank Accounts
- Open accounts at different FDIC-insured institutions
- If one bank has technical issues or is affected by a disaster, you’ll still have access to funds at the other
2. High-Yield Savings Accounts
- Your money grows with interest rather than losing value to inflation
- Still remains relatively accessible when needed
- Continues to have FDIC protection
3. Prepaid Debit Cards
- Load emergency funds onto prepaid cards
- More secure than cash if lost or stolen (if registered properly)
- Widely accepted where cash might not be
4. Secure Safe
If you do keep some cash at home:
- Invest in a quality fireproof and waterproof safe
- Choose one that can be bolted to the floor or wall
- Consider a safe deposit box at a bank for valuable documents and items
Real-World Caution Tales
I’ve seen firsthand what can happen when people keep too much cash at home. My neighbor lost nearly $5,000 in cash during a minor kitchen fire. The money was kept in a “safe” kitchen drawer, but smoke damage and water from firefighters destroyed it completely. The homeowner’s insurance only covered $200.
Another friend’s grandmother kept her life savings—over $20,000—hidden throughout her house. When she passed away, the family only found about half of it. The rest remains missing to this day, likely accidentally thrown away or forgotten in places no one thought to look.
Bottom Line
While keeping a small emergency cash fund at home makes sense, storing significant amounts of paper money comes with substantial risks and disadvantages. The lack of insurance protection, vulnerability to theft or damage, zero growth potential, and other drawbacks make it a risky financial strategy.
For most people, the sweet spot is keeping enough cash on hand for short-term emergencies—perhaps $500-1,000 depending on your household needs—while keeping the bulk of your money in FDIC-insured accounts where it can be both safe and potentially growing.
Remember: your money should be working for you, not just sitting around waiting for something bad to happen to it!
What do you think? Do you keep cash at home? Have you experienced any of these disadvantages firsthand? We’d love to hear your experiences in the comments below!
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- Reasons people keep cash at home include emergency preparedness, financial privacy concerns and mistrust of banks.
- While some cash at home may be a good idea, it is a safer option to keep most of your liquid funds in an FDIC-insured bank account.
- A locked, waterproof and fireproof safe can help protect your cash and other valuables from fire, flood or theft.
How much money you keep at home depends on your personal situation, including your need for cash in everyday life as well as in an emergency situation. Some experts recommend keeping a minimal amount of cash on hand, since a federally-insured bank account would be a safer option.
How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
- • Personal finance
- • Mortgages
- • Consumer banking
- • Savings accounts
Kristen Kuchar is a former banking editor with expertise in savings accounts, certificates of deposit and general personal finance, such as budgeting and saving money.
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Here is a list of our banking partners.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
How to Properly Store Paper Currency/Money and Other Important Documents
FAQ
What are the disadvantages of keeping cash at home?
- Stolen cash is nearly impossible to recover. Your money is safer in a bank account. …
- Money stored at home won’t earn interest. One of the most compelling reasons to keep most of your cash in a bank account is to help it grow. …
- Cash can get damaged.
What is the safest way to keep money at home?
The safest way to store cash at home is in a fireproof and waterproof safe that is bolted to the floor or a wall. Experts recommend keeping a small amount of cash at home for emergencies and storing larger amounts in a bank to protect it from theft and natural disasters, as home cash is not FDIC-insured and can lose value over time.
What are three risks to keeping your money at home?
- The money can be lost or stolen. Hiding cash under the mattress or anywhere in your house always carries the risk of being misplaced, damaged or stolen. …
- The money isn’t growing. When cash doesn’t grow, it loses some of its value.
Should you keep money in the house?
Key takeaways. Reasons people keep cash at home include emergency preparedness, financial privacy concerns and mistrust of banks. While some cash at home may be a good idea, it is a safer option to keep most of your liquid funds in an FDIC-insured bank account.