How safe is money in the bank?
The safety of our members is our main priority and when deposited in a bank or building society, your money is securely backed by the Financial Services Compensation Scheme. If in the unlikely event your funds were misplaced or your bank declares bankruptcy, this scheme will guarantee you financial compensation.
The Financial Services Compensation Scheme will cover up to £85,000 of your savings balance. Compare this to an insurance claim against a loss of finances kept at home and the difference is huge. The latter will see you reimbursed with only £1,000 - see what Money Saving Expert’s Martin Lewis has to say on the matter.
So when it comes to keeping your money stored at home, it’s important to consider all of the dangers involved in this decision. Whether it’s the higher risk of theft and loss or the gamble of losing it in unforeseen circ*mstances such as a house fire or flood damage - these are all factors you should bear in mind.
We would always recommend keeping only what you need day-to-day in cash and leave the safety of savings up to a financial institution.
Advantages of keeping money in the bank
Unlike home savings, a savings account can offer you steady and often rewarding interest rates, meaning the more you deposit, the more you earn. Growing these finances over the years can build substantial collateral, which otherwise would be missed if you kept your money outside your account.
It’s a timely process to build your finances, but savers can give their money the best helping hand by utilising their building society or bank. Check out the various savings accounts and Cash ISAs available via our Savings Hub.
Managing money for young adults
As the cost of living continues to creep up, social media trends on the topic have also started to emerge. An example of this is ‘cash stuffing’ which sees young people withdrawing lump sums of cash and storing it in a categorised folder - with budget sleeves allocated to each area of their life, e.g. groceries, social spend and bills.
Whilst in theory, the idea of money management should always be encouraged, the lack of financial safety or forward planning behind this trend is concerning. Young people in particular are heavily reliant on a healthy credit score for certain financial transactions and dealing only in cash for savings and purchases prevents you from establishing a clear financial record.
Keeping your money in the bank enables you to build up a digital footprint of your spending and savings ability which lenders will take into account. So when making larger purchases such as buying a car or stepping foot on the property ladder, your affordability can be judged on these digital transactions. Cash payments can’t be reviewed, making it quite likely any loan application would fail or further action would be required.
Find out more about how to improve your credit score via our Mortgage Hub
