Are you wondering whether it’s smarter to keep your money in the bank or at home? Well, keep reading, because this post is for you.
For many people, keeping their money at home feels like the safest and smartest option. But the truth is, if you’re keeping your money anywhere but the bank, you’re taking an unnecessary risk, and even worse, leaving money on the table. And that’s exactly why, before we get too much further, I want to answer a very important question: is it better to keep money in the bank or at home?
In short, it is better to keep your money in the bank than at home. For one, banks carry insurance, which allows you to recuperate your money in the event of fraudulent withdrawals or charges. Additionally, by keeping your money in the bank you have the ability to earn interest, which is not possible when you keep your money at home.
So, if you’re currently keeping your money at home, it’s probably time to move it from your sock drawer to a savings account. But, if you’re still questioning whether it’s a good idea, keep reading.
In the rest of this article, I’m going to cover a few of the main reasons you should keep your money in the bank.
Let’s dive in!
Benefits Of Keeping Your Money In The Bank Instead Of At Home
Ability To Earn Interest
Of all the reasons to keep your money in the bank instead of at home, the ability to earn interest is one of the most important. You see, when you keep your money at home, you eliminate any possibility of earning interest, and therefore, your money won’t grow at all.
In fact, if you’re not earning interest, you will actually be losing a little bit of money every year due to inflation. I don’t know about you, but if I’m going to save my money, I at least want it to maintain its value.
Now, before we go much further, I want to clarify something. Just because you put your money in the bank, does not mean you will earn interest. Or, if you do earn interest, many bank accounts don’t earn enough to keep up with inflation. So, when you go to open a savings account, you need to be sure to pick one that earns between 1% and 2% a year. There are quite a few options out there, but here at Be The Budget, we recommend the CIT Savings Builder. It earns a nice interest rate, and it’s super easy to open an account.
Your Money Is Insured
Another extremely important reason you should keep your money in the bank instead of at home, is that banks carry insurance that protects your money in the event that any of it gets stolen. So, in the very unlikely case that someone were to get access to your checking or savings account and withdraw or spend your money, you wouldn’t be liable for any of it, and you would get all that money back.
If you’ve ever seen or heard advertisements for different banks that say FDIC insured, this is what they are referring to.
On the other hand, if someone were to steal the money you were keeping at home, would you be able to get it back? My guess is that the money would be gone forever.
To put it simple, if you want to make sure your money is protected, put it in the bank.
Side Note: most bank accounts are only insured up to $250,000. So, if you have more than that amount of money to put in the bank, it is best to split it between multiple accounts, or even multiple banks.
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You’ll Be Less Tempted To Spend It
If you are the kind of person to keep a bunch of cash at your house, then chances are you are pretty good at resisting the temptation to spend it. That said, if you really want to reduce your likelihood of dipping into your savings, you should put it in a bank account where it will remain hidden from view.
This is the whole ‘out of sight, out of mind’ principle, and it really works.
It’s Still Easily Accessible
While accessing your money in a savings account is a little less convenient than a wad of cash in your sock drawer, your liquidity is still very good. So, in the event that you ever need the money for an emergency or an unexpected expense, the money isn’t difficult to access.
Now, I personally think this pairs well with the fact that the money is out of sight. Why? Because, when you keep your money in the bank, you will be less tempted to spend it, which means it will be there when you need to access it. And isn’t that the whole point of saving?
You Can Automate Your Savings
When you keep money at home, not only do you have to cash every paycheck you earn, but you also have to have the discipline to set aside your savings and leave it be. Meanwhile, if you keep your money in the bank, you can set up direct deposit, which in many cases, allows you to automatically split your paycheck between your savings and your checking account. So, without ever having to drive to the bank to cash or deposit a check, you can increase the amount of money in your savings account.
It’s a wonderful way to take the guesswork out of saving, and ensure that you stay on track for your financial goals.
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Keeping money in the bank is a much better option than keeping your money at home. Between the ability to earn interest, the protection of insurance, ease of access, reducing your temptation to spend it, and automating your savings, there are quite a few benefits with which your sock drawer just can’t compete.