Money Management

How much cash do you keep at home? See why keeping too much cash in your home can be risky — and how the best bank accounts can help. [[{“value”:”

There’s a popular saying that some people are so reluctant to risk losing money in the stock market, or so afraid of bank failures, that they’d rather keep their money under a mattress. It’s understandable that economic uncertainty, previous bad experiences with bank accounts, and high-profile stories about bank failures might make some people want to keep more cash at home.

But how much physical cash should you really keep at home? Survey data shows that most Americans have access to less than $500 of physical cash. But is this the right amount of cash to keep at home, or too much? Having too much cash on hand sounds like a good problem, but it can be risky.

Let’s look at a few reasons why you need physical cash at home (or not), and how the best bank accounts can help protect your money.

Why $500 is a reasonable amount of cash to have at home

The biggest reason to keep cash at home is in case of emergencies. It takes a lot to shut down banks and point-of-sale credit card payment systems at stores and restaurants, but it could happen.

What if your neighborhood gets hit by a natural disaster, you lose power, and you need some quick cash to buy food or pay for help? My home city recently got hit by a series of severe thunderstorms that knocked down trees and knocked out power; if we had a prolonged power outage and needed to pay for help to clear our driveway, having cash would be useful.

For emergencies, keeping $500 of physical cash at home seems like a reasonable amount. This could be enough cash to help tide you over until power is restored, banks are back open, and nearby stores are accepting credit cards again.

Why you shouldn’t keep too much cash at home

Some people, unfortunately, have not had a good experience with using bank accounts. Some Americans distrust banks and don’t want to keep all their money there. Other people prefer the feeling of getting to touch the money in their monthly household budget (as seen in the “cash stuffing” budgeting trend).

Actually getting to look at your emergency savings fund, in cash, might feel more secure and personal than cold numbers on a banking app.

Here are a few big risks with keeping too much cash at home.

1. Your cash at home could get stolen or destroyed

No one wants to be a victim of crime, but it does happen. Keeping too much cash in your home makes you vulnerable to robbery and theft — or even losing your money to house fires or natural disasters. If someone uses your bank account for unauthorized transactions, the bank can give you your money back. If your cash at home gets stolen or blown away by a storm, it’s often gone forever.

2. Your cash at home could get lost

Unless you are keeping your cash at home in a safe, in a reliable location, in a way that you don’t forget where it is, you might lose money by, well…losing your money. But keeping money in a bank account means that every dollar is tracked and accounted for — and you get FDIC insurance in case of bank failure. This protects your money up to $250,000 per depositor, per insured bank, per account ownership category.

3. Your cash at home doesn’t earn interest

This isn’t a big deal if you’re only keeping a few hundred dollars at home for emergencies. But if you’re keeping thousands of dollars of cash in the house, you are missing out on significant interest yield that you could get from the best high-yield savings accounts. For example, $10,000 in a 5.00% APY savings account would earn $500 in a year. Don’t let your home cash stash cost you even more money by not earning interest income.

Bottom line

Some people don’t keep any cash at home, but most Americans keep less than $500 of physical cash on hand. If you don’t want to count on credit cards or online banking in case of emergency, keeping some physical cash at home could be a smart move. But if you’re keeping thousands of dollars at home, you might want to reconsider. The best bank accounts can pay high APYs on your savings and give you the reassurance of FDIC deposit insurance.

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CDs are a safe bet for your money, but they can’t compete with investing in the stock market. Read on to learn why. [[{“value”:”

Certificates of deposit (CDs) have become a popular investment over the past few years as rising interest rates have helped push CD rates higher. And they’re still a good option for some people.

A few 5-year CDs have annual percentage yields (APYs) over 4.00%, giving people a safe place to earn a decent return on their investment.

Despite these relatively high rates, I don’t have any money in CDs. And if you want to maximize your returns, you shouldn’t either. You could earn much more by investing your money in the S&P 500. Here’s why.

The odds are in the S&P 500’s favor

The stock market can be volatile, which makes many people nervous. Their hesitation is understandable, but there’s also a risk of not investing your money in the market. That’s right, it’s risky not to put your money into the market because it’s possible it won’t grow fast enough.

Consider this: The S&P 500’s historical annual rate of return is 10.2%. If your aim is to save as much money as possible for retirement, the stock market is the place to do it.

Let’s assume you put $5,000 into a 5-year CD earning 4.00% APY. Meanwhile, your friend puts the same amount into an index fund tracking the S&P 500, earning 10.2% annually. At the end of the five years, you would have about $6,083 — but your friend would have about $8,126.

Of course, there’s no guarantee you’ll earn that much each year. But you could, and you could even earn much more. Just for perspective, the S&P 500 has soared 79% over the past five years! And it’s this huge potential of the S&P 500 that makes it a far better long-term investment than a CD.

How to ease into investing in the stock market

The easiest way to start investing is to open a brokerage account and buy a low-cost index fund. Plenty of great investing apps make it easy to open an account.

Thinking about the stock market can be overwhelming if you’re new to investing. So, let’s simplify a bit: The S&P 500 is just an index that tracks the performance of 500 of the largest companies listed on U.S. stock exchanges.

You can buy shares in funds that track the index, just like you can buy shares of individual stocks. For example, I own shares of the Vanguard S&P 500 ETF, one of the largest index funds in the world, which tracks the benchmark S&P 500 index.

And if you never develop an interest in investing in individual stocks (like Apple, GM, Amazon, etc.), you can just stick to the index fund. Your investments will benefit when the market as a whole is doing well.

Before investing your money into the stock market or a CD, ask yourself what your goals are. If you’re nearing retirement and need a small portion of your money to simply outpace inflation, then buying a CD may be the right move.

But if you want to maximize your returns and give your retirement funds the best possible chance to grow over time, put your money into the market.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool has a disclosure policy.

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Costco is getting a shake-up. Read on for some key changes that recently took place or will be happening soon. [[{“value”:”

Costco isn’t necessarily a retailer that makes a lot of breaking news. After all, it’s not like the store is going through a rapid expansion or closing locations because it’s struggling.

But actually, Costco happens to be going through a few big changes right now. Here are three major ones you need to know about.

1. Membership fees are going up

A basic Costco membership currently costs $60 a year, while an Executive membership costs $120. But after a seven-year reprieve from fee hikes, members will have to pay more starting Sept. 1. At that point, the cost of a basic membership will rise to $65 a year, while an Executive membership will cost $130.

To be clear, though, Costco isn’t going to ask you for more money on Sept. 1 if your membership isn’t up for renewal. Rather, once your renewal date arrives, you’ll be subject to the higher price. If you’re someone who hasn’t yet joined but are thinking about it, though, then you may want to sign up this month for $5 or $10 less.

2. Non-members are banned from food courts

Costco’s famous $1.50 hot dog and soda combo has long been a draw for customers. Costco used to allow non-members to access its food courts as a means of getting them in the door and perhaps enticing them to join.

But recently, Costco changed its policy. Now, if you’re not a member, you can’t use the store’s food court — period.

This change clearly isn’t great for people who enjoy grabbing a quick meal but don’t want to pay for an annual membership. But it’s a positive one for Costco members.

Limiting food court access to members could mean shorter lines to grab your hot dog, pizza, or meal of choice. Plus, everyone knows that Costco’s parking lots are perpetually jam-packed. If non-members can’t come in for a bite, it means they also won’t be taking up room in the parking lot.

3. Executive membership rewards are changing

As mentioned, the cost of an Executive membership will soon rise from $120 a year to $130. But the amount of cash back you can rack up with an Executive membership is also increasing from a maximum of $1,000 per year to $1,250.

Before you get too excited about that, though, realize that to score $1,000 a year at a rate of 2% back on purchases, you have to spend $50,000 at Costco in the course of a year. To score $1,250, you have to spend $62,500. Unless you’re feeding an entire village for a year, your Costco spending probably won’t come close, and your annual Executive membership reward will probably be a lot smaller than the maximum.

Now that Costco has made some pretty substantial changes, it may be a while until we see more come down the pike. But pay attention to Costco in the news, because you never know when a surprising announcement might come through.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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