Saving in cash (i.e. in a safe deposit box or safe)

Parsimonia

Hi

This is probably a really, really stupid question!

Is there ANY advantage or benefit in saving for retirement etc. in cash (i.e. by putting your money in a safe or a safe deposit box), rather than investing it or putting it into a high interest savings account?

I realise that with a bank account, an ISA or some other form of investment you earn interest, but (except for an ISA) you also pay tax.....

However, the pros of savings accounts or investments would seem to far outweigh the cons, but are there ANY benefits to saving the old-fashioned way, the way my gran used to (though obviously using a safer 'safe' than the biscuit tin that she used to use...)?

I'm asking for pure curiosity....

brendon

Probably not. There are only a few ways which saving in cash is safer. One situation is if the government was to decide to take x% of what everybody had saved (a haircut) -- this is what the Cypriot government/EU wanted to do last year or so. The second situation is if interest rates were to go negative. All in all, these two things are unlikely to happen so it's best not to save in cash.

Wilkins

If you mean large amounts of money, I can't see that this could ever be a good idea. It also has the potential disadvantage that hoarded coins and notes could eventually become no longer accepted (not sure if it would be always possible to convert them). On the other hand, there is the (exceedingly remote, I would think) possibility that some money might become numismatically valuable.

jimjames

I can't see any reason why you would want to save long term money as cash.

You may pay tax on money in the bank - but only if you are being paid interest so you are still ahead. Keeping it in cash to avoid paying tax on interest just seems totally daft.

As cash it will be losing value all the time you keep it due to inflation. You also have the fairly significant risk either of theft or if hidden well enough of complete loss through misplacing it.

In Cyprus savings above a certain amount had a haircut but the same didn't happen to investments so you could say that if that was your concern then well chosen investments are safer than bank holdings above £85k.

Parsimonia

Thank you both for your comments. I suspected that the cons outweighed the pros, but I was curious.

My husband can't work due to ill health, but he's just lost his incapacity benefit, so I need to save as much as possible, and accrue a high enough pension, to ensure that we are fine as a couple once I finally retire.

When I retire I'll have a large lump sum, and we also have an endowment maturing in 4 years time. I

I wondered if there was any advantage to be gained in squirrelling those savings and lump sums away in cash, rather than investing them, but I guess I knew deep down that it was a foolish idea.

I suspect that what I was really trying to do was avoid paying tax...but as I don't want to do anything illegal, it's probably better just to bung the cash into ISAs and savings accounts and let it accrue interest.

Updated - hubby lost his benefit appeal so it's a time for belt-tightening, not saving unfortunately!

wigglefish123

I suspect that what I was really trying to do was avoid paying tax...but as I don't want to do anything illegal, it's probably better just to bung the cash into ISAs and savings accounts and let it accrue interest.

Having to pay tax on interest beats earning no interest at all !!

kidmugsy

Our policy is to keep our cash in ISAs and interest-bearing current accounts, scattered across several banks and building societies. If one goes bust, or gets crashing computers, we've got the rest as back-up. We have a mix of account styles: cheque book, pass book, online and telephone-operated.

Parsimonia

wigglefish123 wrote: »

Having to pay tax on interest beats earning no interest at all !!

Yes, very true!

I'm very uninformed when it comes to savings and investments, and I thought there may be a downside to having your savings so visible...in case the government decides it wants a huge bite out of them, or something.

In fact, I'm so uninformed and clueless that although I have an ISA account, I don't use it and just keep all my money in a regular (low interest) savings account. I'm hopeless, and I need to become a bit more savvy, as both of us will be depending on me making good decisions and choices!

I really appreciate all your insights - thank you!

Wilkins

Parsimonia wrote: »

I suspect that what I was really trying to do was avoid paying tax...but as I don't want to do anything illegal, it's probably better just to bung the cash into ISAs and savings accounts and let it accrue interest.

Saving cash at home is not illegal, but it is foolish. Please, don't do it.

Archi_Bald

wigglefish123 wrote: »

Having to pay tax on interest beats earning no interest at all !!

One of the wisest posts on MSE ever.

Wish I could give more than one Thanks!

jimjames

You can put over £11k per year into ISAs (cash & investments) so for the amounts you are talking about per month that will easily cover the tax free allowances. You also have the option of using pensions which will get tax relief on any contributions boosting them by 20% or 40% depending on your tax rate.