WealthWire is reader-supported. We may receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers.
Hoarding cash is one of the worst ways to build wealth
We get it — seeing wads of cash or a full piggy bank is satisfying and a symbol of wealth. Storing cash seems like an excellent way to save money and a good marker to track how much you’ve been saving.
But did you know storing and hoarding cash is actually one of the least efficient ways to build wealth and save money? This is because your money is not being invested into assets that will increase your wealth over time, limiting your wealth potential.
Here are some reasons why you should avoid holding large amounts of cash, and our recommendations to help build your wealth.
1. You Could Be Earning Money With Your Money
By holding cash, you are missing out on earning interest on your money. Why hold hundreds in cash when you can put it into a high-yield savings account to earn interest (free money basically)?
There are many options out there for savings accounts, but our recommendation is Chime. Chime is a legitimate banking company that over 12 million Americans use, and there’s a good reason why. Chime boasts one of the highest interest rates for savings accounts, especially at a time when it’s hard to find good rates.
On average, traditional savings accounts only earn .19%. Chime is completely free, and gets you a whopping 1.50% APY on every dollar placed into your account with NO limit on interest earnings.
Applying only takes 2 minutes, check out Chime here.
2. You Are Losing Money From Inflation
With inflation hovering around 9% in 2022, holding money means losing 9% of its value. The longer you hold cash, the less it will be worth over time. This is a big reason why we recommend investing in assets such as precious metals, bonds, property, or investment accounts.
If you haven’t considered investing in precious metals such as gold or silver, we recommend learning more about it. Gold has held its value over thousands of years, and it’s a good and stable asset to have against inflation.
Lear Capital is currently offering a free kit to educate Americans about investing, check it out here.
Hot Tip: Many people do not consider the effects of inflation on their wealth. If you’re not actively fighting the effects of it, you are losing wealth year by year!
3. Cash Is Not Insured
One of the best benefits banks provide is insurance for the money you trust them with. The FDIC insures all money in most banks up to $250,000.
The money you have lying around at home cannot be recovered if it is lost. Many people like to have a safe at home with cash or under the mattress, but this money can easily be lost in accidents or theft.
We recommend putting cash into a high-yield savings account or investing in low-risk assets to minimize your chances of losing money.
4. Dealing With the IRS
If you are storing lots of cash at home and decide to deposit it all in the future, you could run into some problems with the IRS.
The IRS requires all banks to report a deposit of $10,000 or more. Even if you do small deposits over time, banks will often flag those and you may get contacted by the IRS.
Not holding large amounts of cash can help you worry less about moving money around, as it will all be tracked from your accounts.
Many Americans believe that cash is king. With high inflation rates and other options to grow wealth, we believe that there are better ways to grow your wealth.
Check out our article on how to inflation-proof your wealth and follow along to get more tips and tricks to grow your wealth.