We have had people call us to inquire about storing cash in a safety deposit box.
Our standard response has been, “It depends.”
While we maintain confidentiality and do not probe into the specifics of what’s stored in a user’s box, as long as they aren’t prohibited items, we recognize the importance of this question.
To provide clarity, this blog provides a balanced view of the pros and cons of storing cash in a safety deposit box. Some key points to consider include:
- It’s legal to store cash in a safety deposit box.
- Cash stored in a safety deposit box can be insured.
But the question remains: Why do we often say, “It depends”? This blog aims to shed light on that, offering a detailed look at both the advantages and potential drawbacks of storing cash in a safety deposit box.
Pros of Storing Cash in a Safe Deposit Box
The majority of us enjoy the freedom of not having to worry about the security of our cash when stored in banks.
However, with the rise in inflation and the availability of financial education, there are now many reasons why some people prefer to diversify their cash storage beyond banks. Into other financial assets such as gold, memorabilia, precious items, or even holding onto the cash itself.
What are some of these reasons?
Protection against bank failures
In the event of a bank failure, the Financial Services Compensation Scheme (FSCS) provides coverage for eligible accounts up to £85,000. However, for individuals managing larger sums, self-storage of cash may offer additional protection exceeding the £85,000 threshold.
Storing cash personally can act as a form of self-insurance, offering you control over your funds. This can be achieved optimally in a secure environment such as a safety deposit box.
While most banks do not permit the storage of cash in their safes, private facilities provide this service, often including complimentary insurance covering up to £10,000. This alternative not only enhances security but also offers peace of mind for individuals seeking to safeguard their wealth against unforeseen banking adversities.
Protection against Economic Crises
During economic crises, such as hyperinflation, people often look for ways to protect their money from the negative effects of inflation.
One common strategy is to keep money in an interest-bearing account or certificate of deposit.
However, it’s important to note that most banks have strict rules for managing cash kept in interest-bearing accounts.
In the current economic climate, the Bank of England has mostly kept interest rates low, which means that the benefits of storing money in an interest-bearing account may be limited.
During times of inflation, it may be more beneficial to remain liquid and use your money as planned, rather than relying on the interest rate to provide protection against inflation.
Storing cash means you have more liquidity or more money at your disposal. Some view this as having greater control over their finances and thus are well-equipped to manage the effects of inflation.
Cons of Storing Cash in a Safe Deposit Box
High inflation devalues ‘stashed’ cash overtime
Over time, inflation can reduce the value of the cash you’ve stored away.
For instance, £500 kept in a safe deposit box 50 years ago would still be £500 today, while the same amount in an interest-bearing bank account could have grown to £6,000, assuming a total increase of 1,100%.
By storing cash in a safe deposit box, you miss out on the chance to grow your money through interest or other investment gains that a bank or financial institution could offer.
It is a well-known fact that the UK Government is working towards a ‘cashless society’
Current trends and statistics predict that the UK government is moving towards a cashless society unless legislation is introduced to protect stored cash.
If the cashless drive works out as planned, by 2030 there may be less incentive to use cash. Apart from keepsakes, there may be no point in storing physical cash, as it could become obsolete.
It’s important to keep an eye on the changing landscape of financial transactions and make informed decisions about where and how to store your money.
You can only access your cash during your centre’s opening hours
While storing cash in a safety deposit box can provide added security, it’s important to consider the limitations.
Unlike using a credit/debit card, access to your cash stored in a safety deposit box is limited to when the centre is open. This may not be ideal for frequent travellers or urgent cash needs.
Ultimately, how you manage your money is your personal choice. It’s legal to keep cash in a safety deposit box, but it may raise questions of legitimacy if you’re subject to HMRC or police investigation.
You can store anything legal that fits in your chosen box size and isn’t prohibited by the centre’s terms and conditions.
It’s important to understand the terms and conditions before choosing to store any items in a safety deposit box.