Should you hoard money during crises?
The prevailing advice is that you should have savings equivalent to at least 6 months of expenses, but the pandemic has prompted some to seek to save enough for a year.
Keeping money in a bank account or in your wallet is useful in difficult times, but it does not mean entering into a panic situation that may affect your financial decisions.
Writer Erin Lowry, in a report published by the American “Bloomberg” website, says that she tends to keep a modest amount of money at home at all times, and this ensures her minimal credit card spending, but things have changed during the pandemic.
What is the appropriate method?
The writer indicated that her friends at the time started talking about withdrawing their money and keeping it at home, and the newsletter for personal funds as well as social networking accounts recommended followers to keep cash on hand. With the stock markets affected by global events and the increasing talk of electronic warfare, it seemed that even the most financial transaction companies using electronic banking transactions in turn store paper currencies.
Despite the importance of having cash on hand during crises and periods of volatility, meaning that you will not be at the mercy of banks or electricity to access the money, the writer says that people’s rush to “hoard money” made her think; Global and local events can have a huge impact on the value of money, and there is no doubt that there is a difference between keeping money at home, depositing it in the bank or investing it. As with any financial decision, you need to think carefully about how much money you are going to keep and if you are going to do it in the first place.
At home or the bank?
During the pandemic, it was common for people to be recommended to bolster their cash reserves, various industries were in a state of uncertainty, and it was difficult to predict how stable jobs would be or when the situation would return to normal, but this does not mean hoarding money at home but rather boosting a savings account.
In times of financial turmoil it is wise to follow this advice, but remember that withdrawing money from investments and excessive hoarding of cash can have a significant impact on your future wealth.
Expenses of at least 6 months
The prevailing advice says you should have savings equal to at least 6 months of expenses, but the pandemic has prompted some people to seek to save for a year. However, keep in mind that spending during crises drops significantly and this will help you maintain your cash reserves, and the author advises that you feel free to speak with a financial planner if you are considering turning your financial assets into cash.
The writer pointed out that keeping money at home gives you easy access to funds to pay for basic needs. Although the risk seems worrisome, it is wise to have cash on hand in case the banking system or the electricity grid breaks down.
The writer said that the reaction of financial institutions is unpredictable. For example, if panic begins to control people, banks may reduce cash withdrawals and the stock market may be closed temporarily to prevent speculators from rushing, and this means that having cash or other physical assets such as jewelry at home may give some peace of mind, but the most appropriate solution is Don’t panic or rush to hoard money at home.
The writer explains that the amount a person will need in the house depends on the cost of living, the number of family members, and other assets he owns, and if you decide to keep your money at home, it is necessary to take into account potential risks such as theft. Although an amount ranging from 400 to a thousand dollars is not a lot, it is sufficient to cover basic needs for a period of time.