Lots of people don’t trust banks and for good reason but hoarding cash isn’t the answer.
While banks were once hidden behind a patina of caring, that has been stripped back to reveal the fact they are a money making business like any other.
If it wasn’t the crash of 2008 that showed us banks couldn’t be trusted, it’s the fact that interest rates on loans and mortgages go up instantly while savings rates take ages to catch up.
So it’s no wonder people prefer to avoid banks altogether.
But hoarding cash is not necessarily a good idea.
I know a couple of people who prefer to deal in cash and keep their nest egg at home in a safe rather than in the bank.
They aren’t preppers. They aren’t conspiracy theorists. They are normal people like you and me.
But I don’t believe hoarding cash at home is the right thing to do.
Here’s why:
Your money is safe in a bank
Your money is perfectly safe in a bank. The Financial Services Compensation Scheme guarantees up to £85,000 in any single banking institution.
You have to be careful though, as the rules say separate institutions, not separate banks.
Banks like HSBC who own First Direct count as one institution, even though they are two banks.
It’s the same for other banking groups with different brands.
This helpful guide from Which? provides a useful insight into what banks own what brands.
You’re missing out on interest
Most bank accounts don’t pay much but they do pay something. If you have a decent amount of savings, you could be losing out on a little extra.
Let’s be honest, it isn’t often the banks give you anything, so you may as well take advantage when they do.
Use instant or flexible savings if you don’t want to lock your money away. You don’t lose access to it even if you use fixed savings.
You can still get your money, you just lose the interest.
Contents insurance may not cover your hoard
Your home insurance may not cover any significant savings at home as there’s usually an upper limit for cash.
You can arrange to cover larger amounts but proving it sufficiently for an insurance company to pay out should you need them to could be a challenge.
Accidents happen
Flood, fire, theft, human error. All things that could destroy your hard-earned savings in an instant.
Even a fireproof safe isn’t totally fireproof. It is resistant to fire and heat but can still be susceptible. Even then, the water from a fire engine can do more damage than the fire.
There are all kinds of things that can happen at home and while they may never happen, there’s little protection if they do.
It’s all on you
If you hoard your money at home, it’s your responsibility. It’s up to you to keep it safe, to help it grow and to protect it from whatever comes along.
Put your money in a bank and it’s the bank’s responsibility. They have to keep it safe, to account for every penny and to compensate you if something goes wrong.
Banks do have some uses
Public opinion of banks may be at an all time low but they do have their uses.
We need them for our mortgages, loans, credit cards, current accounts and for savings.
They give very little away and charge wherever they can get away with it. You may as well get something back from them in savings interest.
Use an instant access account, use the Post Office, use an app, use whatever medium you’re most comfortable with.
Some banks and building societies still use account books and have branches if you prefer to keep it real.
Otherwise, there are hundreds of accounts out there to keep your money safe.
Compare instant savings accounts, choose a name you trust or that has good reviews and deposit some or all your money.
It’s easier than worrying about money under your bed and less stressful than having to hide a safe and plan what to do should the worst happen.
We may not like banks too much right now but that doesn’t mean we shouldn’t use them for our own benefit.
They do the same to us.
