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Why Keeping Cash At Home During A Crisis Is Bad

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Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.

You have probably heard stories about how people keep money in their mattress, hamper, freezer, and shoes. There are probably more places you could hide your money in your home than places you could invest in the market and that list is broad. Nothing feels as safe as home especially to hold your money. That is why many people want to keep money at home during trying times (much like with the Coronavirus pandemic). Just to be clear I am not talking about keeping around a few hundred dollars, but at least several hundred to thousands.

Why People Keep Cash During A Crisis

Keeping cash at home makes sense. During trying times banks may or may not be open. Lines could be going out the door for people to get their hard earned money so they can put food on the table. Wait? Many people have access to their money all the time. 67% of Americans have at least one credit card. Despite their decline more than half of households have a debit card. Even for those without these cards there is online banking. With few exceptions almost no one NEEDS cash anymore to buy the most common consumer goods.

So why do people feel like they need to keep hold of cash now? I have heard theories that the government, corporations, aliens, or even ghosts may shut down all digital currency. Ok I made the last two up, but it actually makes less sense that the government or corporations would shut down digital currency than aliens or ghosts. Both require digital currency to survive and also they would rather avoid massive riots to survive. I’m not sure which one is the main reason.

The only rational reason for holding onto too much cash is fear. You may have heard a story from the Great Depression about a poor family who became the richest people on the block because everyone lost the value of their equities. There is a reason I have not cited one of these stories. We have heard these stories, but they could easily be stories. Either way, keeping cash at home has next to no benefit.

Cash May Not Be Taken

I have done some shopping at the farmer’s market during the virus crisis. Interestingly the people I purchased from refused cash. They took card instead. It makes sense, cash has many microbes on in. This is truly ironic, people try to take out cash because they think it will be the one thing accepted in a crisis and it will not actually be accepted. Simply put, money is money. But there are still ways that keeping too much cash may bring you harm.

The Harms Of Keeping Cash At Home

You Will Be Less Likely To Keep The Money For Long

If you keep too much money at home, you are going to lose it. I do not mean you will forget where you put it, but that you will know exactly where it is and have no control over it anymore. By my experience I am more likely to spend when I have cash in my wallet. I know that sounds controversial to what many studies say about how people spend more using card than cash so let me explain.

If you are trying to save money by spending less on coffee, but then you see a $10 or $20 bill in your wallet, would you be more or less hesitant to go into the coffee shop that day? In my experience I would be less hesitant. That had nothing to do with the method of payment, but simple the feeling of availability. Seeing the cash made me feel like I had some money to spare. If I had no cash and I could only buy coffee by either using my card or withdrawing cash from the bank I would be more likely to spend an extra buck or two for a few extra fluid ounces if I used my card versus cash I did not immediately have.

Coronavirus Is Making You Feel Trapped

Do you think you can keep your cash too long at your home? If you are anything like me you are probably stuck at home. You may feel like you should treat yourself. Even if it is hidden you are probably within several feet of your cash reserve. It is still easily accessible. Even though many stores are closed chances are delivery is still an option.

People tend to spend more when they are feeling down. It is likely you will spend a little money for almost anything that can cheer you up. Or even more likely you may be sick of just eating your own cooking and want to shake things up. Then you may make a habit out of this. I think food delivery is fine, but on occasion. Even now people may still be open to a little excessive food delivery. This may especially be the case if you have cash immediately on hand.

You May Be Robbed

Many people are out of a job. More people have filed for unemployment because the US has followed a paycheck to paycheck lifestyle. Also, I have received three robocalls each day about my car’s warranty (there is an increase in the number of scams). Fearful times are excellent opportunities for financial predators to catch vulnerable prey. However, I also believe that these predators are just as if not even more afraid of their financial situation than their potential prey. Scammers are criminals, but they are also people who need to eat and need to have a roof over their heads. I am not sympathetic to scammers, but I am understanding. And as an understanding person let me be the first to say that if the number of scams are rising, then chances are so will more direct money crimes such as robbery.

You may feel like you will not be a victim or robbery since you are at home. There are many people who would be willing to go at these measures if they feel like they have no choice. Furthermore, you may not be home all of the time, a burglary could take only a few minutes.

Maybe you will feel like nobody knows about the cash hidden in the strange statue you have. It is not as simple as not telling anyone outside your family, some people may be listening. If you hold too much cash it is all be guaranteed that someone you don’t want to know about your money will know. Then there are only two questions: will they stay quiet and will they try to steal from you themselves? I know that is a very scary subject to bring up, but these are scary times.

Final Thoughts

The economy may be crashing, but companies are not about to switch to purely cash only. That would cut potential clients from spending their money which will become the company’s revenue. You have next to no reason to hold onto a stack of cash that is more than modest. But you do have a number of reasons not to hold onto a stack of cash. Seeing additional cash may make you feel more like spending. Even if you do not some people who need money may think that you do not need the stack of cash too much. It would just be a matter of opportunity.

I don’t have a stack of cash in my home. I do not believe that it is wise. There are many better places to keep your money during these trying times. I would even say that the money would be better in a mutual fund or even a defensive stock, even when the market is questionable. The markets may be unpredictable during trying times, but human behavior is not as unpredictable. When people feel trapped they will find ways to escape whether it is by an impulse purchase, or a desperate attempt to make money. Either way, keeping cash at home may not be the best idea to forge your wealth.

Author: Papa Foxtrot

Most of my life I was careful with money and learned where I should invest it. I was very lucky to have parents who taught me financial literacy when I was young. Unfortunately, I am very lucky because many people lack the financial literacy I know. The purpose of Forge Your Wealth is to teach people who are just starting out in life how to obtain their wealth or anyone who just realized they may need to learn more to handle their finances. I currently have a PhD in biochemistry, just started a job in industry (will not disclose where exactly for personal and professional reasons) and am currently married to the love of my life. I am one of the lucky few people in America who graduated with no student debts, my wife was not. Over the series of a little over 3 years we paid for our wedding with no debt and paid off her federal student loans.

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