Still hiding cash under your mattress? You're losing money!

Many people want to save money for various goals, whether it's buying a home, funding their children's education, taking a dream holiday, preparing for retirement, or simply creating a financial safety net. However, not everyone knows how to manage their savings effectively to protect them from losing purchasing power.

Some people prefer to keep their money at home, believing it to be the safest and most accessible method. But is this really a wise and profitable choice? In this article, we'll discuss why keeping your money at home is bad and how to protect your savings against inflation.

Keeping money at home and why it's a bad choice

Storing money at home is one of the most common savings methods for many people in Europe. According to Eurostat, around 29% of the EU population kept their money at home or in places not connected to the banking system in 2019. The reasons why people choose this method include

  1.  Mistrust of banks: Some fear losing their money in the event of a bank bankruptcy or financial crisis.
  2.  Desire for full control: People want immediate access to their money without incurring fees.
  3.  Tradition or habit: Cultural practices may influence the decision to hide money under the mattress.
  4.  Inability or unwillingness to manage finances: Not everyone is equipped to manage finances or research investment opportunities.

However, these reasons don't justify the choice of keeping money at home, as this method has several disadvantages:

   1. No income: Money kept at home does not generate any income and its value decreases over time due to inflation. For example, if you put €1,000 under your mattress in 2013 and left it there until 2023, according to the European Central Bank, your purchasing power would have fallen by 15%. In other words, you'd be able to buy 15% less with the same amount of money.

   2. Risk of theft, loss, damage, or destruction: Your money at home is at risk of theft, damage, or even natural disasters such as fire, flood, or other unforeseen events. In some cases, banknotes can develop mold and become unusable.

   3. No protection from tax audits: Not declaring your income and savings to the tax authorities is illegal and can lead to criminal charges. In addition, if you receive benefits or subsidies, money stored at home may be considered part of your income, affecting your eligibility and the amount you receive.

How to protect your savings

If you want to protect and grow your money, you should look for ways to earn a return above the rate of inflation. One such option is fixed-term deposits.

A fixed-term deposit is a contract between you and a bank where you deposit a certain amount of money for a set period in return for a fixed interest rate.

Why fixed-term deposits are a better alternative to keeping money at home

1. Guaranteed returns: Fixed-term deposits offer a guaranteed return that isn't affected by market fluctuations or economic conditions. You know in advance how much you'll earn at the end of the term, allowing for better financial planning.

2. Security and reliability: Your money in a fixed-term deposit is protected by the bank and guaranteed by the government up to a certain amount. In the European Union, a Deposit Guarantee Scheme (DGS) ensures that each depositor is compensated up to €100,000 if a bank fails.

3. Flexible options: Fixed deposits offer flexibility in terms of terms, amount, currency, and risk level. You can choose a deposit that suits your goals, circumstances, and risk tolerance. Whether you're looking for a short-term or long-term investment, a modest or substantial sum, or a low-risk or high-return investment deposit, there's an option for you.

Conclusion

We hope this article has shed some light on why keeping money at home isn't the best savings strategy and how fixed-term deposits can be a lucrative alternative. Fixed-term deposits offer guaranteed returns, protection against inflation, security, and flexibility, making them a smart choice for protecting and growing your savings.

If you're interested in learning more about fixed-term deposits or other investment opportunities, we invite you to visit our Finding a Fixed Term Deposit page, where you can compare different offers from different banks and choose the one that best suits your needs.

You can also explore our blog where you'll find a wealth of informative articles on fixed-term deposits and financial matters. We're here to help you navigate the world of finance and make the right choices for your financial well-being.