The holiday season, for all its sparkly fun, often brings added stress in the form of gift-buying, restaurant dinners … even the need for new party clothes. As you prioritize where to spend your money, it’s important to also spend some time thinking about the best places to keep
your money. There are many blogs, websites and professionals with recommendations for smart places to keep money. This is not one of them. Here, we offer a word of warning about some really dumb places to stash your cash.
Shoppers, especially during the busy holidays, love buying gift cards. After all, they’re convenient, easy to wrap, and seem to please everyone. But in 2015 alone, Americans forfeited nearly $1 BILLION worth of gift card merchandise and services due to expired or lost cards, and shoppers leaving a portion of the balance on the card after an initial purchase. (This unused card value is known in the industry as breakage or spillage.)
What may be worse than breakage, though, is what’s lost in addition to the card’s face value. That is the interest it would
have earned if it were still sitting in your bank account. Instead of a gift card, consider “gifting” a fun shopping trip. That way, you get to spend quality time with someone you like, that person gets a nice gift from you AND your cash stays in your interest-bearing account as long as possible. Win-win-WIN.
Mobile Phone Apps
By the first quarter of 2016, coffee lovers had loaded over a BILLION bucks onto Starbucks gift cards or its mobile app. That’s more than many large financial institutions have in deposits
! Like gift cards, apps can be very convenient and may even offer rewards in the form of “free” products. But, again, unused money stored in mobile apps does not earn interest.
Hiding money in your mattress (or a hole in the backyard, or your freezer, or a toilet tank, etc.) is a terrible idea because it puts that money at the risk of loss to, well, LOSS. You might misplace it. There’s also the risk of fire, flooding and other natural disasters, and theft (even if the thief is your teenager who just needs to “borrow” a few bucks). Additionally, money hidden at home is –there’s a theme here– not earning interest
. If you must keep cash at home, invest in a fire-proof safe and make sure a trusted relative or friend knows about it. That way, it won’t be permanently lost if something happens to you (or if you simply forget where you hid it).
Online Payment Companies
Like gift cards and apps, online payment companies (PayPal, Square, Stripe, Mozido, Braintree, etc.) make life more convenient. People who sell merchandise online have the option of accumulating money in their online payment accounts. But, also like gift cards, money held in these types of accounts usually does not earn interest and
it may not be federally insured. If you frequently sell products online, get into the habit of transferring your earnings out of the online payment company’s account into a free, interest-bearing checking or savings account. Even if you earn only a tiny bit of interest, that’s a tiny bit more than you would have otherwise.
Many radio and TV ads currently tout the permanence of gold. But owning gold presents challenges: those heavy bars or coins have to be stored SOMEWHERE. Also, gold prices are often volatile, gold doesn’t produce income and its value is determined by the currency in which it is priced – not by supply and demand. Even billionaire Warren Buffet has said putting money into gold (or other non-income producing assets) is speculation, not investing. But if you must own gold, carefully research your options and consider seeking the advice of an independent financial expert.
Credit Card Debt
While nobody intentionally racks up a huge credit card balance, people who allow their money to disappear into debt end up paying much more than the original price of any goods they bought. In addition to costing consumers in the form of interest charges, credit card debt can also cost you late payment fees and other penalties. Missing or making late credit card payments can show up on credit reports – a long-term cost that may affect your ability to get a loan or even some jobs.
Of course there are as many dumb places to stash cash as there are people. Happily, there are also many smart places to keep your money. If you need help finding them, consider seeking the help of a professional financial advisor
. An advisor can show you how and where your money will grow – even when you’re not actively adding to it – and that will always be brilliant.