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Stashing cash under your mattress doesn’t add up

Money under mattress

Do you stash cash at home rather than in the bank? If so, not only are you missing out on making some return on your savings, you’re also losing the protection your money would have if you kept it in the bank.

New research from the Financial Services Compensation scheme (FSCS) has found that a staggering £7 billion is lying around people’s homes.

This means that on average we are keeping £280 at home, although 4% of those surveyed admitted to having more than £1,000, and 1% had more than £10,000.

Keeping this sort of money at home just doesn’t make sense. For a start, if you put your money in a bank or building society which is covered by the Financial Services Authority (FSA) you get FSCS compensation up to the new limit of £85,000 if the bank or building society were to fail. If it’s under the mattress or in a piggy bank however, you may find that it’s not even covered by your house insurance if you were burgled.

It’s in your interest to save

And of course, any money lying around at home isn’t earning any interest. While it’s true that interest rates on savings accounts can be pretty paltry at the moment (and low interest rates were the reason why a third of people in the survey didn’t bother keeping their money in a bank) it’s still possible to get a decent return if you know where to look.

Back in October when we launched the Great British Savings Scandal, we found that British savers were losing out to the tune of £12 billion by not having their savings in Best Rate accounts. That equates to £322 for every saver. If you’re keeping money at home rather than in a bank or building society, then you’re losing out as well.

Put your money in a Best Rate savings account on the other hand, and you could be earning as much as 2.8 or 2.9% in interest. And if you’re a tax-payer, a Best Rate cash Isa will pay similar rates but you get to keep all the interest as you don’t even have to pay tax on it.

Not only will your money be working for you, but you can rest easy that it’s well-protected. Can you say that when your money’s under the mattress?

Comments
Guest
Sophie Gilbert says:
8 January 2011

Stashing cash at home or in a rubbish interest paying account doesn’t make sense. My only new year’s resolution is to look up Which’s best rate savings account shortly and transfer some money around. (Incidentally, it may be more useful if the link above took you to a new page rather than take you completely out of this one.)

Guest
Peter Ford says:
15 January 2011

Maybe, although some people might argue that life’s too short to be excessively concerned about what interest rate they’re getting.

One question to consider is: does the extra interest you can obtain, divided by the amount of time it would take you to do so, work out higher than what your household earns through employment? If not, then it’s clear you should instead just do some over-time at work, or invest the time in personal career development, etc.. And even if the answer is yes, you need to bear in mind that chasing interest rates is what’s known as a “zero-sum game” (pretty much), whereas most people’s employment is genuinely constructive and actually increases the wealth of human society. To get away from economic theory and phrase that in another way – which activity will you be more proud of when you look back on your life from your death bed?

(Incidentally, no. Web browsers provide their users with the functionality to decide how to manage the behaviour of hyperlinks. It is not for a website to bother attempting to second guess what their users want in this regard.)

Guest
Pickle says:
9 January 2011

OK, it’s fine to store cash in a good savings account – but it is a good idea to have some stored at home – say a couple of hundred pounds. Then if there is a power cut and the ATMIN goes down you still have a sinking fund to but food etc.

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Guest

If I could take the money out of one of my pensions I’m sure it would do better under my mattress as I wouldn’t be paying silly amounts of fees on something that’s losing money.