Here’s why it’s risky to hide cash at home

While having some cash on hand can be helpful in an emergency, it’s important to consider where you keep it. Some people stash it in inconspicuous places around the house, a habit that experts say can lead to trouble down the line.

The typical person has roughly $544 in cash and valuables like coins, banknotes, and bullion at home, according to a new survey from financial management app Piere. The site surveyed 1,500 U.S. adults in late January and early February.

Asked where they keep their cash at home, about 10% of respondents store it in a safe, making it the most popular place.

Other spots are less conventional. About 6% hide their cash in a secret compartment such as “a drawer that has a fake side that you can’t see,” said Yuval Shuminer, Piere’s founder and CEO.

Another 6% of respondents said they keep the money either under or in a bed, mattress or pillow, while 5% keep the cash in a freezer or refrigerator. Smaller shares of those surveyed said they keep money in an ornament, vase, or urn (4%), or under floorboards or a carpet (3%). 

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Times of economic uncertainty can lead people to hold more cash, said Shannon Martin, a licensed insurance agent and content writer for Bankrate.

But don’t overdo it, experts say.

Storing cash at home doesn’t give you the same protections as you get with an account at an insured financial institution. You also risk losing out on potential gains from high-yield interest or stock market returns, said Piere’s Shuminer. 

Having too much cash around the house can expose you to a number of issues. For one: Your home insurance policy might not protect the entire amount.

Items like cash tend to fall under a subcategory called special limits, said Bankrate’s Martin. This means that the covered value is capped at a certain amount, which can depend on your insurer, she said. 

Most home insurance policies will have a $200 coverage sublimit to replace cash, coins and precious metals, Bankrate found.

Some insurers offer higher limits. You could also ask your insurance agent about an endorsement to increase the coverage, but then you would have to prove that you have a high amount of money in your house, Martin said. 

“If you’re trying to put in the claim for $10,000 of cash that you have stuffed in your mattress, there’s probably a lot of questions around that,” she said.

Money deposited in an account that is protected by the Federal Deposit Insurance Corporation will be safer.

“If you keep it in a bank, the bank has insurance,” Martin said. “If something happens to your cash at home, you only have whatever’s listed on your policy.”

This can make money that’s lost or stolen difficult to replace, even in the face of natural disasters.  

If your home is impacted by a hazard like a fire and you have large sums of cash scattered in your house, “you’ve got this cash that’s now gone up in smoke, potentially,” said certified financial planner Lee Baker, the founder, owner and president of Claris Financial Advisors in Atlanta. He’s also a member of CNBC’s Advisor Council.

Don’t shy away from having some cash at home.

“I’ve been in a hurricane where power was out for a very long time and the ATMs don’t work,” said Carolyn McClanahan, a CFP and the founder of Life Planning Partners in Jacksonville, Florida.

At that point, “cash is king,” said McClanahan, who’s also a CNBC FA Council member.

Baker agreed: “Having enough cash to get you through a day, perhaps two, actually makes sense.”

Instead of hiding your savings in drawers, bookcases and secret compartments, here are three other places to keep your money:

Experts say that you want to have enough money in your checking account to pay for a month’s worth of bills. Keep anything more than that in a savings account, and ideally, a high-yield savings account.

As of March, some of the top high-yield savings accounts offer an average 4.20% APY versus a 0.6% APY, according to Bankrate.

“It’s just money that they’re leaving on the table,” Shuminer said.

Money for mid- and long-term goals is generally better invested because inflation erodes the value of your savings. While the market can be volatile in the short term, over a long timeline, investment returns will generally outpace inflation, McClanahan said.

“Cash does not outpace inflation,” McClanahan said.

While the market’s recent volatility can be intimidating, experts generally recommend investors focus on their long-term goals.

“You might be leaving thousands of dollars that you could be earning over the course of the next year just by not having it sitting in the right places,” Shuminer said.

For emergencies, have enough money to tide you over for a day or two in a “personal financial bag” at home that you can simply grab in the case of fire or other emergencies, Baker said.

Consider keeping that bag in a water- and fireproof safe, said Bankrate’s Martin. If something happens, you may still be able to go in and get the money, she said.

Whether you have a safe or opt for another location, keep the money in one spot in your house and make sure everybody in your family or household knows where it is, Baker said.

“I would not encourage emergency money being in too many different places,” Baker said. “In the time of an emergency, things need to be simple.”