Where You Should NOT Be Keeping Your Money

From past recessions to the recent health crisis, there is a constant reminder that so many things are not really in your control. When there is uncertainty in the economy, many individuals may feel the need to make a change in their personal economy. Even in the best of times, it can be challenging to know what to do with your money as you can make a variety of financial decisions. However, making a knee-jerk decision with your finances doesn’t always play out the way you hope. Similarly, burying your head in the sand like an ostrich and doing nothing while ignoring your money isn’t always the answer.

Here are three places you should consider avoiding when deciding where to keep your money.

Venmo (and other like accounts)

It is relatively common to have some money sitting in your Venmo, PayPal, and Cash App accounts in this day and age. When you discover you have money sitting there, it can even have the same feeling as when you find a 20-dollar bill in your jeans pocket after not wearing them for several months. Unfortunately, while it can bring you a sense of joy when you find that cash, it isn’t likely the best use of your money. Below are a few reasons why:

• Likely not FDIC-insured – Keep in mind that if the digital wallet company that has your money goes bust for some reason, there is no government-made promise that your money will be returned to you. However, unlikely this is to happen - do you really want to take that chance?
• Harder to keep track of – When you have small amounts of money across the digital marketplace makes it increasingly difficult to remember what you have and where.
• Adds a barrier to meeting financial goals – Treating “found” money differently than treating our savings or credit card is common. Instead of keeping a large balance in a digital wallet, move your money to a regular account to help makes your financial decisions in planning for your future more realistic.

Under Your Mattress

The popularity of keeping money under your mattress dates back to the Great Depression-era bank runs. During this time, people lost faith in financial institutions, and widespread poverty meant safes were no longer affordable for most. As a result, Americans became distrustful of those who held their money and what they may do with it. As a result, literally sleeping on top of your savings became a favorite location to stash one’s savings.

Refraining from using financial institutions for your money is generally a poor idea. Here is why:

• It is not safe – Cash is easily lost by a variety of means – you can be robbed, there could be a fire, flood, or an insect infestation of the “device” used to store your dollars. In addition, others in your house or visitors less concerned with your savings may stumble upon it and decide to turn it into an art project or have a night out with it. Remember, money kept in an FDIC-insured bank is insured for up to $250,000 since the inception of the Federal Deposit Insurance Corporation in 1933.
• It is not growing – Money in a mattress, sock drawer, or freezer losses value as it sits there earning 0% interest. So even if the money in your mattress survives fire, flood, or theft after many years, you will not be able to buy as much with it in the future as you can right now.

In Cash

If you have more than $100 in cash at your home, you may have too much. Many people keep a little money on hand for those unique moments, like when you need cash after a neighborhood kid offers to mow your grass and sell you some candy for a school fundraiser. The smart money move is to keep minimal cash in your home. Here is why:

• No earning potential – The main financial reason for not keeping excessive amounts of cash at your home is that you do not earn any interest on your money.
  
  
• It may not be protected – Depending on your policy, renters insurance and homeowners insurance generally do not have high limits specific to safeguarding the theft or loss of cash in your home. You will need to study your policy to understand what your limit is. In many cases, unless you have a separate rider, you probably will not recover your cash if it is stolen or lost.
  
  
• It can be accidentally thrown out – Don’t hide money in places you will not remember. It is incredibly easy to forget where you put your emergency fund if you are talented at finding good hiding places. And the last thing you want to do is forget where you hid it or mistakenly get rid of it.

Preparation and Financial Planning Can Help

Whenever the economy or market is volatile, having a plan can help you navigate this time of uncertainty. In many cases, if you don’t have a financial plan, it is easy to jump from one financial or investment trend to another. Studies show that every change in the economy does not generally sway those with a solid financial plan in place.

A financial plan can help keep you focused on what you want out of life – your long-term goals. Therefore, making it less likely that any life change or short-term hiccup in the economy diverts your attention from your ultimate target. And, it is never too early or too late to start. Whether good or bad, the decisions you make today will affect your future.

If you are interested in learning more about comprehensive financial planning, our team at Spaugh Dameron Tenny can walk you through what it is and what it looks like for your specific situation. Then, schedule a complimentary discovery call with a financial advisor to learn how SDT can support you and your financial goals.

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