According to a recent GOBankingRates survey, nearly 25% of Americans say the safest place to keep their cash is at home. Yet, by and large, few respondents indicated they actually do keep significant deposits of cash at home.
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The 20-question survey, conducted in August 2023, found that 35.85% of respondents kept just $1 to $100 in physical cash at home, while an additional 16.65% kept nothing at all. Only 9.64% indicated they kept more than $1,000 in cash at home.
These responses raise a number of additional questions, from where Americans are actually keeping their money to what might be better options. Here’s a deeper look at the results of the survey, along with an analysis into the pros and cons of the various options where Americans can keep their cash.
What Do Americans Think Is the Safest Place for Their Cash?
More than 35% of survey respondents indicated that they think a savings account is the safest place for their cash, making it the top overall choice. Nearly equal percentages of respondents deemed “at home” and a “checking account” the best answer, at 23.93% and 23.23%, respectively. No other response garnered more than 5.26% of the vote.
Responses were fairly similar across age groups, although Americans 65 and older had a much greater feeling that Treasury bonds were safer than those aged 18 to 24. The younger generation also thought that money kept at home was the safest option much more than those 65 and older. There was not much variation between men and women in survey responses to this question.
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What Are the Actual Safest Places for Cash?
In terms of protection from physical loss, money kept at home is actually one of the riskier options available. Cash — which is irreplaceable — can be stolen, damaged by natural disaster or simply misplaced when stored at home. When placed into a bank or an investment, on the other hand, account holders are typically insured against these types of losses.
Treasury securities, for example, are backed by the full faith and credit of the U.S. government, which can simply borrow more money if it needs to pay back its obligations. Checking and savings accounts, money market deposit accounts, and certificates of deposit carry FDIC insurance of $250,000 per depositor per type of account, and many institutions offer additional insurance on top of that. This makes these types of accounts much “safer” than keeping money at home.
The primary risk that you’ll have to consider is market risk, but that primarily applies only to stocks and longer-term bonds. Treasury bills, checking and savings accounts, CDs and money markets have market risk at or near zero.
Pros and Cons of Various Alternatives for Cash
When compared with keeping cash at home, most alternative options have a leg up in terms of protection from physical loss. But perhaps equally important, investment options offer the opportunity to keep up with or even outperform inflation, which eats away at the value of money over time.
In other words, the $10,000 you keep “safe” in cash at home may only buy half as much in terms of goods and services a few decades down the road, meaning you’ll actually be losing purchasing power by keeping your money “safe.” Here’s a quick look at the pros and cons of each major alternative to keeping cash at home.
U.S. Treasury Bills, Bonds and Notes
- Pros: Backed by the full faith and credit of the U.S. government; free from state tax; current rates for maturities from one month to one year ranging from 5.37% to 5.56%
- Cons: If interest rates rise, Treasury prices will fall, at least temporarily
Certificates of Deposit (CDs)
- Pros: Typically pay rates a bit above current Treasury rates; FDIC insurance
- Cons: Insurance may be limited to $250,000 per account; penalties may apply for early withdrawal
High-Yield Savings Accounts
- Pros: In the current market environment, many online savings accounts pay 4% or more; FDIC insurance
- Cons: May have to maintain an online account to garner those high yields; some banks still restrict withdrawals to six per month
Checking Accounts
- Pros: Provide constant liquidity, and may occasionally pay interest; FDIC insurance
- Cons: Interest rates generally aren’t high, and some accounts may carry fees
Stocks
- Pros: Generally offer the highest long-term average return of major investment classes, roughly 10% for the S&P 500
- Cons: Carry higher risk than insured options, including the potential to lose all your money
Should You Keep Cash at Home at All?
Keeping cash at home does serve a purpose. In fact, most Americans generally should hold onto at least some cash, primarily for use in emergency situations.
For example, after a natural disaster like a hurricane or a large earthquake, it’s entirely possible that ATM and credit card machines will be unavailable, and you may need cash on hand to get you by until services are restored. But in terms of keeping your money “safe” or using it to reach your life goals, savings and investment accounts are typically better options.
Methodology: GOBankingRates surveyed 1,141 Americans aged 18 and older from across the country between August 2 and August 6, 2023, asking 20 different questions: (1) Have you ever been the victim of identity theft, a financial scam or financial fraud?; (2) If you have been a victim of identity theft, which type of theft did you experience?; (3) If you have been a victim of a financial scam, which type of scam did you experience? (select all that apply); (4) If you have been a victim of financial fraud, what type of fraud did you experience? (select all that apply); (5) Have you ever been scammed making any of the following purchases?; (6) All together, how much money have you lost due to identity theft, financial scams and/or financial fraud?; (7) If you lost money due to identity theft, a financial scam or financial fraud, were you reimbursed for it?; (8) What is the most common way you are contacted by scammers?; (9) How often do you change your bank account passwords?; (10) How do you keep your money safe while traveling? (select all that apply); (11) Where do you think is the safest place to keep your money?; (12) How much physical cash do you keep at home?; (13) If you have been scammed out of money when shopping online, how much did you lose?; (14) If you are retired, have you ever experienced these common retirement scams? (select all that apply); (15) Have you, or any of your family members, experienced a Social Security scam?; (16) If you have lost money from a tax scam, how much did you lose?; (17) Have you ever experienced a student loan forgiveness scam?; (18) What type of impact do you think identity theft has on its victims?; (19) What are some ways you protect yourself from identity theft today? (select all that apply); and (20) Do you have antivirus software installed on your computer?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: Nearly 25% of Americans Say the Safest Place To Keep Cash Is at Home — How Much Do They Keep on Hand?
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