The Ins and Outs of Keeping a Cash Hoard

A recent survey of 1,820 adults from American Express found that the number of people hoarding cash outside of financial institutions has grown over the past few years. With banks paying next to nothing in interest, there’s little to be gained by keeping your cash in a savings account.

And there’s much that could be lost. You could lose your privacy, and potentially your identity, as institutional cyber-crime continues to grow. Moreover, the potential for a systemic failure in the over-leveraged banking system remains a very real threat.

The massive bank bailouts in the wake of the 2008 financial crisis have only encouraged financial institutions to resume some of the same high-risk practices that got them into trouble in the first place. The Bank for International Settlements estimates the amount of derivatives outstanding in the global financial system to be $691 trillion. If a tiny fraction of them goes bad, the system goes kaput.

ATM Cash Machine Failures
Can Strike Widely and Suddenly

We’re not suggesting you need to pull out of the banking system entirely. Some have chosen to go that route, and it may be worth considering. But at the very least, you need to make sure that you aren’t overly reliant on your bank accounts. In a financial crisis or a cyber-attack, your ATM card could become temporarily disabled.

That’s why having some cash hidden away in your home is a good idea. Emphasis is on some. Cash is a depreciating asset. It is potentially vulnerable to theft or loss due to fire, flood, or other calamity. (If a bill is more than 50% intact, it can be exchanged for a replacement bill).

Still, in the event of a personal emergency or systemic financial collapse, you may have a sudden need for cash. That’s why you need to have some cash as an emergency reserve. Despite the push toward a cashless society, cash remains the most widely accepted method of payment in the physical, person-to-person economy.

You can and should hoard alternatives to U.S. dollars, as well, but as of now Federal Reserve Notes are the easiest to spend. You may have trouble spending foreign currencies or Bitcoins or even gold and silver coins. Gold and silver won’t be as universally recognized as U.S. dollars. At least at this point in time. Many are ignorant of the history of gold and silver coin as constitutional money, and to them a silver dollar is as foreign as a Polish zloty.

Precious metals can potentially be used in barter transactions, but gold and silver are primarily for long-term wealth protection rather than immediate spending needs.

Why You Should Never, Ever
Hide Cash in the Freezer

So once you’ve accumulated a stash of $20s, $50s, and maybe a few $100 bills, where will you put your reserves for safe keeping? A fireproof safe is an obvious choice. It’s also going to be obvious to intruders. So the safe itself needs to be well concealed.

A safe that sits in plain view in your bedroom closet only serves to help burglars identify where your valuables are located. The fact that a safe is locked does nothing to deter a burglar from carrying it away with him. He knows he’ll eventually be able to break it open. He probably has the tools he needs at home. If not, he could easily obtain them at the nearest hardware store.

Finding a good hiding place may be more important than having a safe. The worst hiding places are the most commonly used ones. A 2012 Marist College survey found that the most popular hiding place for cash is the freezer. Second is a sock drawer, followed closely by underneath a mattress. Never use a freezer, chest of drawers, or bed to hide cash or other valuables.

Former Louisiana Congressman William J. Jefferson is sitting in prison today for bribery and corruption because the FBI caught him with $90,000 in cash hidden in his freezer. Lessons to be drawn include:

  • Don’t obtain cash illicitly.
  • Don’t keep $90,000 in cash (a fraction of that should be sufficient for emergency needs).
  • Don’t keep your entire cash stash in one place.
  • Don’t keep any cash in the freezer!

Have two or three inconspicuous hiding places in or around your home. (Many more than that and you may forget some of them over time.) Consider embedding your safe(s) in concrete or installing them into the wall or floor to make theft more difficult.

You’ll gain peace of mind and better sleep knowing you’re more resilient to financial emergencies.