There are many ways you can save your money with, like with bank accounts, certificates of deposits, saving box, and they all boil down to 2 major places, either in a bank or at home. If you’re starting to save money, you’re going to have to decide where to put it, and if you’re already saving it, you may want to double check your decision.
Around 69% of adults around the world have a bank account according to Global Findex Database, so you might be motivated to follow them, but you also maybe against that and thinking to save your money at home instead of the bank.
There are 5 advantages and 11 disadvantages of saving money at home as listed below, so clearly the disadvantages outweigh the advantages. With that being said, saving money at home is still recommended only if it’s kept there for emergencies, and having around $1000 or what it’s worth can be enough.
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Who saves mainly at home?
According the Global Findex Databases, 31% of adults don’t have bank accounts and therefor they prefer to save their money at home. There are many reasons for that as per the research I did, and they include the following:
In some religions like Islam, Ribbah which is lending money to someone and having it back with interest is prohibited. Although this concept doesn’t apply to all banking areas, yet some people still feel comfortable getting away from it all, and that’s why they either save it at home or invest it.
Some people just follow what their parents and grandparents did, so if they were keeping the money at home, they’ll do too. It’s not that they are against banks, but it’s just the way they used to save money with.
Unlike with culture, people in this category has serious doubts and concerns of handing their saved money to the banks which are owned by institutes they believe are longing to spy or manipulate or control them through their money.
They stash their money at home to feel safe knowing that governments or other institutes they fear, can’t touch them.
I don’t think this category has too many people in it, but it’s still a factor that has been discussed, that some people opt to save their money at home to prepare themselves for any future crisis.
I’m not talking pandemic crisis or fire crisis because those are normal to prepare for, I’m talking here about apocalypse kind of crisis, which even if happened, saved money might not be of great value then, but who knows.
Advantages of saving money at home
1- Availability and convenience
For many people, saving money at home is more convenient than the bank because they know it’s always available to them anytime of the day. They don’t need to look for near ATM machines, nor worry about system malfunctions that prevent withdrawing the money.
This is a double edge sword point and you’ll understand why by the end of this article. When you think about it, it’s safer to keep your money at home with you.
You know you have total control on where to put it or how safe you want it to be. With banks, you don’t have any control on their safety structure, so what if they’re vulnerable to theft?!
3- No banking processes
Oh, this is one of the points that is almost selling me the idea of having the money at home, bank processes.
When you choose to save money in the bank, you’ll have to go through an exhausting process of following up with the advanced math skills of the customer service agent who tries to explain the different options you have so that you can choose the best way of saving your money.
Then you’ll have to fill in a lot of papers, you’ll have to come up with your unique signature that you must use every single time you want to deal with the bank itself.
You’ll need nothing of the above to save your money at home, and if you are a student saving money, you have be at certain age to apply yourself.
4- Saving fees from banks
Saving money literally means keeping the money as it is, and this is the case when you do it at home. When you do it in the bank, you have to pay some fees like:
- Opening the account
- Maintenance of the account
- Paper reports sent to you (not all banks do that)
- Issuing or Renewing your debit or credit cards
5- Religion/culture friendly
As we discussed above, some people go for saving their money at home in compliance with their own religion or culture ideology or principles. That’s why doing so, is more of an advantage to them.
Disadvantages of saving money at home
Now here the second edge of that sword I mentioned above. Even though saving the money at home has security on its side, it still poses some serious risks when it comes to security.
Saving money at your home can still be robbed, specially if the word came out either intentionally or accidentally like when kids are talking.
2- Potential suspect in some countries
In some countries, having a large amount of money kept or stashed at your own house could be seen as red flag. In the U.S. for example, Homeland security can confuse you as a drug dealer or money launderer.
3- Easier to spend
You know the old drill that goes like “Money kept in hand is faster to be spent”. Now imagine that on a larger scale. Having more and more money at home increases your urge of using it, so it’s very easy to spend it unlike if you’re keeping it away in a bank.
4- Losing money
When you’re saving money at home, you’re making a mistake of losing money through 2 ways:
4.1 Losing added money
Although saving money means keeping it intact, it’s unwise to waste options that can make it grow.
When you opt to saving money at home, you’re making a choice to waste added money through the compound interest the bank gives you for your saving account or the certificate of deposit.
Even though these interests aren’t relatively big, but over the long time they make a huge difference. Try playing with this calculator and you’ll see for example that $100K turns into $964K in 20 years with an annual 11.5% – 12.5% annual interest.
4.2 Losing value of money
This is done through the inflation rates that continues to go up each year or so, increasing the cost of many goods. This means that the money you have at home, is losing portion of its value as time goes by.
Example: Let’s say you saved $1000 on January and kept it on your home for a year. During that year, there was 2% inflation, so all goods now cost 2% more This means that the $1000 can buy $980 worth of goods. It lost 2% of its value to the inflation that happened.
5- Vulnerable to destruction
Even if your money isn’t going to be stolen, it’s still prone to being damaged or totally destructed due to any household related problems.
- A plumbing problem can damage your money.
- The money can be burnt in a fire
- It can be lost due to a natural disaster like hurricanes, or flooding bringing the house down
Losing the house to even one of the above scenarios is a major loss in itself and losing your money along with it is going to be catastrophic.
6- No insurance
Money lost at home can’t be reimbursed unless you have an insurance for its lost or destruction as what happens when you save your money in banks, and I don’t think it’s a thing you can do.
7- Limited room for saving
It’s an uncommon disadvantage but still applicable if you think about those who are committed to saving at their home all lifelong.
saving money then becomes limited to the space you have available for it. The longer you save at home, the more money you’ll have, and the larger space you’ll need to avail for it.
For some this won’t be an issue if it’s not that much, but for some, it might trigger some following actions to avail more space which might not be convenient, and you’ll have to make serious decisions to have the same level of advantages you had before:
- Are you going to keep it in the same house or another one?
- Where are you going to do it in the same house? Where or what you’ll do with the things already there?
- If you need another house/place, how will you get it, buy it, or rent it? Where?
Again, it’s not common, and I think only happens to those who can save a lot of money each month and do it for many years.
8- Hard financial interaction with others
8.1 Transferring money problems
In today’s world, it’s most likely that one day, you’ll have to transfer money to another person for the house you bought from him for example.
It’s more likely that he’s going to ask you to send his money to his own account, and this is where it’s going to be tricky for you, specially if we’re talking about big figures.
Now you’ll have to do it through the bank, with a risk of losing the money along the way, by being robbed, or lost in transportation.
It’s an unnecessary risk if you think about compared to transferring the money directly from your account to his.
8.2 In ability to buy online
Same concept as with transferring the money to another person, but with institutes.
When you think of buying things, you’ll have to take an exact amount of money from your home to that of the things you’re going to buy.
Since you can’t know that number for sure, this might make your trip inconvenient, specially if you’re furnishing your new house for example, you’ll have to take a large amount of money which also has the risk of being lost as before.
If you think about it, with the technology we have today, using your debit card to pay for the things you want is much easier, less risky, and makes your shopping more convenient. The only thing you need to know here is your spending limit to avoid exceeding it, and even if you don’t have it, the machine won’t withdraw money, telling you that you don’t have enough balance, so even then you’re covered.
The only situation where not using your debit card and using cash is a good practice, is when you’re trying to control you spending to maximize saving and improve your financial wellbeing.
9- Difficulty of moving around without cash
When you think about it, sometimes, life just through things at you and you’ll have to act right then. You might be coming from your work, only to have a call from your wife, that the cooker is down, and she couldn’t cook dinner. Now you must buy dinner on your way home.
If you’re not moving with extra cash for these situations then you either won’t have dinner, or you’ll have to buy it once you have your money from home.
You can spare the extra time and energy lost due to not having the money in the first place, buy always carrying extra and enough cash for similar events which is hard to maintain or use your debit card to withdraw from any near ATM machine or even pay using it directly.
10- Difficulty of traveling
It’s one of the uncommon disadvantages as well where in some countries like U.S., it’ll be difficult for you to travel to another place with large amounts of money on a plane.
11- Difficulty tracking status
Saving money is one step of the whole project. Tracking it and updating your financial status is another piece. To track your progress when you’re saving money at your home, means you must count money manually, you need to create a log sheet for your money, keep those logs in a safe place as well, and even create copies of those logs in another safe place as a backup.
Otherwise, you’ll have to count all the money manually and create new logs from scratch, with still losing the old data if you didn’t have back up
The alternative is simply copying an account statement from the ATM machine or the bank to know everything you need to know about.
Conclusion: Should I save my money at home?
You see that by saving your money at home you have 5 benefits compared to 11 disadvantages that are posing serious risks for your money or going to impact your life quality by adding more work or taking away some benefits.
When you think about the disadvantages also, you’ll see that the alternative is easier, more convenient, still safe, and can still serve the same purpose of saving money and even adds to it.
Still saving money at home is beneficial for the sudden emergencies one can face, and I recommend the following:
- Keeping at least $1000 or what it’s worth in your currency at home. You can go above that if you can keep it safe and secured, and $2000 can be enough for most emergencies. At least it can cover the initial emergency phase, and later you can use the money saved in your debit card or bank.
- You should keep that money at a secured place in your house
- Tell your household where it is so that everyone can use it in case of emergencies when you’re not around or if it’s your emergency.