Storing cash at home may have been a common practice in the past, but it is not always the wisest choice in today’s world. Several factors can work against you if you choose to keep your savings at home, which is why it is better to consider alternative options such as using a bank.
There are compelling reasons why keeping money at home is not always advisable, and opting for the security of a bank is a more prudent decision. The traditional approach of stashing savings under the mattress can be risky, and it is crucial to be aware of these risks in order to make an informed and responsible choice.
Cons of keeping money at home
Keeping all your savings at home instead of in a bank account can come with its own set of expenses. While there are advantages to this approach, it is important to consider the drawbacks of storing money at home rather than in a bank.
It is worth noting that it is perfectly legal to have cash at home, and even the Bank of Spain recommends having a reserve of 6 to 10 months’ worth of fixed expenses in cash. However, this legality assumes that the money has been acquired legally and is properly declared to the Tax Agency.
In Spain, there are no specific regulations that define a maximum amount of money that can be kept at home. Nevertheless, engaging in this practice carries certain risks. It is essential to carefully consider the following reasons why you may want to think twice about keeping all your savings at home:
- Theft
One of the risks associated with keeping cash at home is the potential for theft. While our country does not have a very high crime rate, it doesn’t eliminate the risk of a burglary occurring in your home.
- Fires and natural disasters
Furthermore, unforeseen incidents like fires or natural disasters, such as flooding caused by heavy rains, can pose a threat to your cash stored at home. These events could lead to the loss of your money.
- Inflation
Another significant danger is inflation, which can erode the value of cash over time. By keeping your money at home, you risk its purchasing power diminishing. On the other hand, depositing funds in bank accounts, earning interest, or making investments aligned with your understanding can provide better protection against inflation.
- Issues with the Tax Agency
It’s important to consider that even if the cash you have saved is acquired legally, depositing a large sum into a bank account may attract attention from the Tax Agency. You might be required to demonstrate the source of those funds. To avoid complications, it is advisable to declare the cash in your tax return, clearly specifying its origin to ensure compliance with tax regulations.