Get more from your money with up to 5.00% p.a. interest

with a National Seniors Term Deposit account

Why you should not hoard cash at home

No, it isn’t safer to keep your money at home instead of the bank. There are all sorts of reasons why that thinking is flawed.

By John Austin, National Seniors Australia contributor

Sign up for the Connect newsletter

  • Finance
  • Read Time: 4 mins

Key points

  • Inflation means your money has less buying power.
  • Seniors hide cash at home to beat Centrelink.
  • Cash can go to non-concessional super contributions and term deposits.  

On clearing out my father's closet, we found $15,000 in cash and a note, written before he died, that it was for a "rainy day". The notes were stuffed in the pockets of his old raincoat.

My father had planned for the worst - typically prudent of a generation that lost so much to man-made disasters.

Hiding cash in the home is not unusual for older Australians. The main reasons are the belief that banks are not safe and governments will take money from the bank, which lingers from previous generations hurt by the Great Depression.

How much cash can you have at home?

National Seniors Term deposit

National Seniors Term Deposits offer up to 3.5 per cent per annum interest. With no fees and flexible terms, lock in a competitive interest rate that is protected for your fixed term.

There are no laws limiting the amount of cash you can keep at home.

This makes sense as many businesses, especially retail stores, keep large amounts of money with them merely as floating cash. So, why would not a homeowner be allowed to do the same? You may need it for something important.

While researching this article, I came across many views about why we should not take advantage of this.

Burglary was the main one. But one I would never have thought of was the police getting the wrong impression. If the police visit your home during a neighbourhood raid, substantial amounts of cash are often linked to illegal activities, and you could be investigated for money laundering or worse.

Topping that was the anecdote that not all police officers are trustworthy, and some may decide to pocket the cash. So, why would you allow this to happen? I never thought of that either. 

Inflation bites

If you think hoarding cash at home protects your savings, think again. The banks are not the problem, inflation is.

Inflation is eating into cash holdings, and its buying power is going backwards.

The official inflation rate for 2021-22 was 6.1 per cent, up from 3.8 per cent the previous financial year.

Inflation currently sits at more than 7 per cent. If that holds until June 2023, it will mean that every dollar you hoard will have lost 18 per cent of its value in just three years.

Savings interest rates are rising and although they are not keeping pace with inflation, depositing into savings and term accounts provides some growth and stems the inflation-induced bleeding.

Hoarding cash to stop Centrelink from tracking your assets and preserving your pension does not work. It is called fraud, and Centrelink has considerable resources to interrogate and monitor your pension asset and income situation.

The penalties for committing fraud when reporting to Centrelink range from 12 months to 10 years imprisonment. If you obtain a Centrelink benefit by deception, a prison sentence is an outcome, and you may be liable for the 10-year maximum sentence. 

CreationWealth senior financial adviser Andrew Zbik recently told the true story of an elderly gentleman who moved into a nursing home. His family cleaned up his house and disposed of some old paint tins in his shed.

“He had $100,000 of cash in the paint tins, and the family threw it all out,” Zbik says.

He says some people hold piles of cash without considering options such as fixed income which may be an inflation-beating solution for them.

“A lot of people do not realise that they may be able to make a non-concessional contribution into super. Every fund has low-risk options, and you can get a better return for not an exceptional amount of risk.” 

For further reading: The Australian, Money Australia  

Sign up to the Connect Newsletter

We've got your back

With National Seniors, your voice is valued. Discover how we campaign for change on your behalf.

Learn more