There are certainly plenty of options for storing cash short-term, but one of the worst is to store actual cash somewhere in your home. Besides a few hundred dollars, or maybe even up to $1000 in actual bills, storing cash at home is extremely risky. If you have some type of emergency such as fire that burns that money, a tornado that blows it away or a flood that disintegrates it, not only will you have an emergency but your actual emergency fund will be gone as well.
And, if you think that insurance companies will pay back any cash that you lost, think again. Most insurance companies cover about $200 of cash that customers claim was stored inside their home, and if you think about it, you really can’t blame them. Anyone could make up a story about having hundreds or even thousands of dollars stored in their home and how exactly would they prove it?
Besides emergencies however, inflation will also destroy the value of any actual bills that you keep at home. As the actual value of those bills go down you’ll have less to cover you if you have an actual emergency. The same can be said for a basic checking or savings account because of the fact that they pay a miniscule amount of interest.
All that being said, if you want to know the best place to store cash for the short term, the recommendations from financial advisors below should help. Enjoy.
1- Treasury Inflation-protected Securities (TIPS). These change according to the Consumer Price Index and have very short term redemption times, making them one of the best inflation hedges for preserving your cash. They can be purchased directly from the US Treasury Department for as little as $100.
2- Laddered CDs. This is a strategy where you purchase CDs with three, six, nine and 12 month maturities, and if they mature without being used in an emergency, you roll them over. The small profit that you will get from the CDs as they mature longer will offset the CD portfolio as a whole in terms of inflation.
3- For each primary household wage earner who happens to be self-employed, increase your emergency fund by 50%. The fact is, entrepreneurship is a notorious strain on cash flow. Experts also say that you shouldn’t put the cash for your household in competition with your business.
4- For medium-term goals like buying a car or putting a down payment on a house, open a separate account. “A separate account helps you see meaningful progress toward that goal and helps you resist hitting up the account for other things or for emergencies,” says J’Neanne Theus, the CEO of Marathon Financial Inc. out of Columbia, Maryland.
5- If you have excess money in an emergency fund that has been growing untouched, balance it out by sweeping the excess into other types of investments.
Those five recommendations should definitely have given you some options as to where to store your cash that are better than stuffing it into your mattress at home. If you have questions about short-term investments or other financial questions, please let us know by dropping us a note or sending us an email. We’ll be sure to get back to you ASAP with answers and suggestions.
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