Where’s Your Money Safer? The Bank vs. The Mattress

See what your home insurance policy will cover when storing your cash at home.

I watched an interesting documentary a few nights ago about the striking resemblances between the Depression in the 1920’s and our current credit crunch. And while some critics may argue the correlation, one thing is for sure- people are becoming apprehensive (just as they did when the Depression began) about how safe their money is in the bank. 

American history tells the story which is to blame for this fear. During the Depressions thousands of Americans were left broke when they went to withdraw their  money from the bank and left empty handed. Banking institutions just didn’t have the money to pay out- and bank account holders were left in the dust- broke and on their own. So the question is, in times like this-

Is your money safer in the bank, or under the mattress?

Hearing about the financial crisis hurting the large banking institutions across the country, many Americans may be tempted to pull their cash out of the banks and keep it in their homes. However, this option might be riskier than many people think.

First of all, we did learn something from the bank failure during the Great Depression. President FDR, as part of the New Deal, created the Federal Deposit Insurance Corporation (FDIC) whose logo you have most likely seen emblazoned on your banking institution’s checks and deposit slips. The FDIC was created to prevent another bank failure and since its inception in 1934, no depositor has lost a single cent of insured funds as a result of bank failure.

Critics argue, however, that if enough banks fail over the next few years, that it would be possible for the FDIC to run out of funds.  (The FDIC is currently holding about $50.2 billion in it’s fund.)

Despite their lack of  faith in the FDIC, there is a valid argument for why your money might be safer in a banking institution rather than in your home. The biggest reason being, at least in the bank, it is insured.

Many homeowners mistakenly believe that in the event that their home is robbed or completely destroyed due to a covered peril, that their homeowners insurance would cover any cash they had lying around the home.  The truth of the matter is, there is a very low coverage limit placed on money kept in your home. Typically, your homeowners policy will only replace up to $200- and that is total coverage for cash, bank notes, gold and silver pieces, coins and medals. And no, you cannot take out an endorsement (or increase your coverage) for cash covered under your home insurance policy.

The FDIC will typically insure up to $100,000 per depositor, per bank.

In my opinion, I would recommend keeping your money in the bank. No one can ever be sure when a fire, flood or other loss may take your home and destroy your belongings (and cash!).  If, however, you insist on keeping your money at home- make sure you keep your cash in a fireproof safe that is bolted to the floor, to prevent loss from fire or theft. And remember, anything over $200 will not be replaced by your homeowners policy.