The unexpected risk of holding cash
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Cash, risk, and volatility
I was talking with a Moneyin2 reader recently about her savings. She lives paycheck-to-paycheck but had managed to save a few thousand pounds from side gigs.
How do you save it? I asked.
“In cash”, she replied.
Are you earning interest on your cash? I asked.
“No,” she said. “I keep it in cash.” She meant “cash” literally: She keeps several thousands of pounds hidden in a metal box in her house.
This is the very worst way to keep your savings
You can lose the box. Your house could catch fire. You might get robbed. It just isn’t safe.
This is why banks exist! And, of course, if you use a high-rate savings account then your cash will earn money while it sits there in safety.
She knew all this, of course. She reads Moneyin2. So I asked her why she was doing this — when she knew that her cash might be gaining interest or, if invested in stocks, the higher gains that come wit…
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