MONEY-MAKING MOMENT: Remember when people used to hide money under the mattress? That trend is back with a twist.
According to a report I read, more than a quarter of Americans put their cash in the freezer! Other popular options for stashing cash at home include the cookie jar and in a sock in the drawer.
People have been afraid of banks ever since the financial crisis, or they’re felt that the interest rate is so low, why even bother? I spoke to a gentleman recently who told me he had $15,000 in cash sitting in his house. That’s an unnecessary risk in my book.
So here’s my take. First, your money is safe up to $250,000 on deposit through FDIC protection (bank) and NCUA protection (credit union). Second, it is true that the big banks will rip you off. By the time the fees start, you could end up with less money than you started out with. But the danger of keeping big amounts of cash in your house is that somebody could swipe it.
In reality, you don’t have to do business with a big bank. There are savings accounts from online banks such as TIAADirect.com and others that I know the return is puny, but it can be 1% or 1.25%. Why not earn that instead of earning a big fat goose egg on the money in your house? (Editor’s note: Interest rates are subject to change without notice.)
The other issue is if you’re sitting with cash and you’re afraid to invest it, you may need to get over that fear. If you won’t need the money for 10 years or longer, you need to step out on the risk equation to give your money the opportunity to grow beyond the rate of inflation.
Editor’s note: This segment originally aired April 26, 2012.