Storing Cash at Home: What Savings Amount Is Safe to Keep in Physical Currency?

What is the appropriate cash amount to keep at home? The short answer is that it depends on your financial means. Physical currency brings a level of freedom, privacy, and security with it. Ultimately, the decision as to whether to keep cash at home and if yes, how much, is up to each individual. Understandably, the answer depends on various circumstances and limitations.

So, what are the factors that determine the reasonable and acceptable cash amount to keep outside of the banking system?

1. Government policy on cash circulation

As of yet, no government worldwide has imposed a maximum threshold on the amount of cash an individual may keep at home, beyond which such savings would become illegal. It is worth mentioning however that several nations have enacted statutory limitations on financial activities and transactions involving paper money circulation:

• When you cross borders, declaring the cash you have on you might be mandatory. While countries like Turkey have no limits on the amount of cash one may bring in, exporting it is subject to rigorous restrictions. To avoid potential legal issues with customs, you should thoroughly research the laws that govern the legal import and export of cash when traveling internationally. Frequent travelers need to keep in mind that the amount of cash they may carry with them is limited, and it may be necessary to partially keep funds in a non-cash form.
• In many European countries, there exist strict regulations on cash payments. Citizens and residents are not allowed to pay in cash for purchases exceeding a certain amount, which typically ranges from EUR 1,000 to EUR 3,000. Sellers are not permitted to accept cash payments beyond these limits, except from foreigners. The latter enjoy more lenient payment limits, often up to EUR 15,000.
• Depositing large cash amounts into a bank account may draw unwanted attention from tax authorities. In the US, bank employees are required to report to the IRS any deposit over USD 10,000 that is made into a checking or savings account. To avoid scrutiny from the authorities, it may be easier to keep large amounts in cash.
• When applying for a residence permit or renewing it, you may need to have a certain amount of money in a local bank account. To prove solvency, foreign nationals are often required to open a local bank account with a balance that exceeds the average salary in that particular region.

2. Market rules regulating cash circulation

Businesses, including banks, have their own set of regulations on how customers should pay for products and services, aside from the government’s attempts to monitor citizens’ finances. The reason behind these regulations is logical, as cash transactions may be quite expensive. Keeping cash safe, as well as collecting and transporting it are all additional costs that diminish a business’s profitability.

Various measures have been taken to decrease the use of cash as a means of payment:

• One example is that in many retail stores, customers can only pay through a terminal, with paper money not being accepted due to technical issues.
• Another example is the prevalence of online payment options for services, as traditional payment methods are no longer sufficient. This is particularly true for paying utility bills. Typically, you may only do it through online banking in developed countries.
• A good credit history is becoming increasingly important, as many banks approve cheap loans for active consumers only. This means that people about to apply for a real estate mortgage with low-interest rates and convenient installment plans shall prove that they can use credit cards responsibly for everyday expenses and make non-cash payments.
• Many banks tend to limit the amount of cash that may be withdrawn from ATMs on a daily or monthly basis, while users are restricted on the number of online payments they make from their cards.

In an attempt to reduce the use of cash, governments, banks, and businesses have taken numerous measures. Financial experts suggest keeping only a minimal amount of cash for urgent situations and emergencies. However, in a time when governments aim to exert greater control over digital finances, and many people prefer traditional payment methods, is it wise to follow this advice? Let’s analyze the implications such recommendations may have. 

Arguments for and against keeping cash within easy reach

Argument: Keeping large amounts of cash at home is risky as the police may confiscate it if a person is suspected of illegal activity, even if they are not proven guilty in a court of law.

Counterargument: Banks may freeze a person’s account quickly and with a 100% guarantee, whereas there exist many secure places to hide cash, making it less vulnerable to government or law enforcement seizures.

Argument: The risk of keeping cash at home is that it may be lost or stolen, and no guarantee exists that it can be recovered. Additionally, cash is vulnerable to damage from natural disasters, fire, or water.

Counterargument: While banks may seem like a safer option, they have their drawbacks. Bank accounts may be frozen or seized by the government, and banks may also go bankrupt or experience security breaches. Bank fees and interest rates may eat away at savings over time.

Argument: It is a wasted opportunity to potentially increase wealth if you keep cash at home without profiting from it. By investing in stocks, bonds, or other financial instruments, you will generate passive income and potentially grow savings over time.

Counterargument: Investing also comes with risks, and there is no guarantee of profit or growth. Market fluctuations, economic downturns, and other factors may result in losses instead of gains. For some people, the perceived safety of keeping money at home outweighs the potential benefits of investing.

Having analyzed the benefits and drawbacks of storing physical money, what can we conclude? Despite being an old-fashioned way to build up savings, the method boasts more advantages than disadvantages. Yet, keep in mind certain realities when you decide how much cash to keep at home:

• Bank accounts and non-cash transactions are essential in modern times, so it’s wise to store some money in the banking system for various needs. Remember, though, that the amount shouldn’t exceed the maximum that the Deposit Insurance Fund will reimburse.
• To diversify savings, convert them into different currencies. Keep the amount needed for daily expenses in national currency for a year, and convert the rest into freely convertible reserve currencies or the least inflation-prone currencies.
• Store only the number of physical bills at home that you can easily transport in case of an emergency. Remember that money, like any other physical item, has weight and size, so evaluate your physical limitations wisely to be able to move your cash from home if necessary. 
• To diversify investments, you may want to consider precious metals. Gold bars and coins, for instance, are the cash equivalents that you can keep at home.
• Regularly swap old-style bills for newly issued ones, and stay informed about Central Bank news on bills that are being phased out of circulation. This way, you’ll avoid issues where sellers or other parties cannot accept outdated money as a form of payment.
• If you believe it’s sensible to convert a part of your savings into a non-cash format, consider cryptocurrencies and offshore banks that respect clients’ confidentiality, such as those in Northern Cyprus.

With this in mind, the recommendation to not keep more than USD 1,000 in cash at home mentioned above is a topic of debate. While there are some drawbacks to keeping physical money, it is still considered a more reliable storage option than banking.