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URL:  http://boards.fool.com/you-both-bring-up-an-interesting-fact-that-is-21416042.aspx

Subject:  Re: My smart grandmother. Date:  10/7/2004  5:22 PM
Author:  mysticrhythm Number:  42642 of 76237

You both bring up an interesting fact that is something to consider today. Individuals of a certain generation that recalls the failures of banks during the depression often have a deep distrust of institutional savings. I know my grandmother had zero faith in banks and kept her money in the house. Unfortunately, there are substantial risks to this:

Nature - Fire, floods, mold/mildew, etc. can deteriorate or destroy dollars and insurance cannot in most cases replace it.

Theft - I was at a friend's grandmother's house while she was having some work done. She paid the contractor by pulling down a coffee jar full of money and drawing out several hundred dollars for her payment. Hopefully more people have better sense than showing off their cache of funds to strangers, but nevertheless, if it's known that cash is in the house, there is a risk of theft by strangers (or sadly, by family).

Time (part 1) - Due to dollar depreciation over time, funds that are saved in the past are not worth the same in the present. Saving those dollars in the cookie jar may be a sign of thrift, but the "real" value can be greatly diminished by the time those funds are needed. Placing them in a bank or other financial institution allows the money to work and accumulate interest and preserved or increased value.

Time (part 2) - Squirreling away money can often mean forgetting where the money is. Dementia, Alzheimers, stroke, or other illness may leave a person unable to communicate where their funds are. Same, for obvious reasons, with death. This is particularly unfortunate when one spouse hides away money for various reasons from their spouse, and when they die, their spouse is unable to live comfortably because those "saved funds" cannot be found.

For those of us with parents or loved ones who have a history of hoarding money at home, it is a good idea to sit down and have an honest discussion about the risks of doing so and help them set up a bank or money market account where they can safely keep their savings and have the money continue to work for them as hard as they worked for the money :)

MR
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