Storing all your money in cash at home isn’t safe. Your home could be burglarized. Someone who knows you and knows that you keep your money at home—a child, relative, or friend—could pilfer your stash. Burglars know most of the places people hide their money. Even worse, you could be robbed while you’re at home.
Another risk is that, if your house floods or catches on fire, your money will likely be destroyed, and homeowner’s insurance covers just a limited amount of lost cash. If you bury it in the backyard, the container you put it in could become damaged or start decomposing and destroy your money. You could also simply forget all the places you’ve stashed your cash. Did you tape that $100 to the back of the family photo in your bedroom, slide it into your favorite book on page 52, or hide it in an oatmeal canister in the back of the pantry? Keeping all your money in prepaid debit cards is also less secure than keeping it in the bank.
If you live paycheck to paycheck, the most you’re ever at risk of losing or having stolen is the amount of your last paycheck—a sum you clearly can’t afford to lose if money is tight. Keeping your money secure is paramount. And once you have more than a few hundred dollars to your name, you’ll want to protect your savings.
The most secure place to put your money is a bank account. As long as you choose a legitimate bank that has Federal Deposit Insurance Corporation (FDIC) insurance (or a credit union that has National Credit Union Association insurance), any money you put in the bank (up to FDIC insurance limits) is protected.12 To date, the guarantee provided by the FDIC has proved to be completely reliable, even during times of financial crisis like the 2008 recession or the savings-and-loan crisis of the 1980s and 1990s.