Should you keep cash at home during inflation?
Q: I’ve been seeing posts all over social media about keeping cash at home during times of rapid inflation. Is this a recommended practice?
A: Keeping large amounts of cash in envelopes, kitchen drawers, or stuffed under the mattress is not recommended during inflation or at any other time. Here your questions on handling cash during times of inflation are answered.
Why is it a bad idea to keep cash at home?
While it’s perfectly OK to keep some cash at home, storing a large amount of cash in your house has two significant disadvantages:
- The money can be lost or stolen. Hiding cash under the mattress, or behind a picture frame, in your house always carries the risk of being misplaced, damaged, or stolen. As careful as you may be, circumstances beyond your control may cause you to lose that money. For example, a worker in your home may find the cash and steal it, household pests might chew on the bills and render them unusable, or your cash-strapped teen might decide the money is there to pay for their entertainment expenses. Unfortunately, there is no way to trace or reclaim lost or stolen cash.
- The money isn’t growing. When cash doesn’t grow, it loses some of its value. This loss is especially true during times of rapid inflation.
Where is the best place to keep cash?
In times of high inflation and anytime, it’s best to keep the money you don’t need for day-to-day expenses in a place where it can grow. This way, the growth will serve as a hedge against inflation. Conversely, when inflation is lower, your funds can grow generously, especially if you keep the money in a savings vehicle for an extended period. Here are some places you may want to keep your cash at this time:
Savings account.
A savings account offers a safe and secure place to keep extra funds. When you open a savings account at a credit union, there’s no risk of losing or someone stealing your money. It is federally insured for up to $250,000 by the National Credit Union Administration. In addition, the average interest rate (at the time of publishing) at a credit union savings account is currently 0.08% APY*, giving your money a way to grow. Elevate Credit Union’s saving rates are above average, and we also have money market options.
Real estate.
The real estate market has experienced an explosion since the coronavirus pandemic and can be a great hedge against inflation for the savvy investor. Before going this route, though, make sure you have enough cash on hand to manage your property and cover any relevant expenses, such as property taxes, repairs, and more. If you’re hesitant to invest in a physical property now, consider owning publicly traded securities or a real estate investment trust (REIT). A REIT is a company that owns, operates, or finances income-generating real estate for investors.
Precious metals.
Precious metals, like gold, silver, and platinum, have proven to hold their value even during inflation and a volatile stock market.
Share certificates.
A share certificate is a savings account that is [federally] insured and has a fixed dividend rate and a fixed date of maturity. The dividend rates of these accounts tend to be higher than those of savings accounts. And there is generally no monthly fee to keep the certificate open. The fixed dividend rate will remain unaffected by the national interest rate. The national rate can fluctuate tremendously during times of high inflation.
Now you know if you should keep cash at home during inflation. Inflation is high, but that doesn’t mean hoarding your cash at home is a good idea. Instead, follow the tips above to find the perfect place to park your cash and let it grow.
* APY = Annual Percentage Yield
