Why People Prefers Physical Cash Over Bank Savings

When it comes to handling large amounts of money, many people have a preference for keeping their assets in physical form rather than depositing them in banks to earn interest. There are several reasons behind this preference, rooted in factors such as legal and security concerns, distrust in banks, and historical experiences with financial instability.

Legal and Security Concerns

The primary reason many people prefer to keep large sums of cash physically is due to legal and security concerns. Cash that is acquired illegally or through dubious means cannot be deposited in a bank without risking the money being reported to the authorities. For instance, criminals, drug dealers, and those involved in illegal gambling often keep cash outside of the banking system to avoid detection and potential legal repercussions. These individuals may conceal their wealth, boasting about it to maintain a veneer of social and economic status while keeping their finances hidden.

Distrust in Banks

While not strictly illegal, some people also choose to keep their money in physical form because they distrust banks. This distrust can be rooted in a variety of factors, including past experiences of bank failures, the fear of financial institutions freezing accounts, and concerns about data breaches. History has shown that banks, though they safeguard our money to a certain extent, are not immune to failures and are often subject to scrutiny and regulations that can lead to account holders being exposed to significant risks.

Historical Experiences and Personal Fears

The choice to keep money in physical form can also be influenced by personal fears and historical experiences. For example, during the economic downturns of the 1930s, many people lost their savings due to bank failures. Even in the modern era, deposit insurance has limits and there is always a risk of FDIC insurance not covering the full amount in case of a bank failure. Additionally, the fear of personal security and safety comes into play. Keeping large sums of physical cash leaves individuals vulnerable to theft or other forms of robbery.

There are specific groups who are particularly wary of keeping their money in banks. Gamblers, for instance, prefer to keep their funds in cash to avoid disclosing their finances, which can have adverse professional and personal consequences. Similarly, individuals involved in illegal activities such as drug dealing and prostitution have reasons to keep their money out of the banking system. The threat of legal scrutiny and the potential loss of their savings if their financial activities are uncovered adds to the incentives for maintaining cash on hand.

Personal Experiences and Family Legacies

Personal experiences and family legacies also play a significant role in the preference for keeping money in physical form. For instance, the experience of my wife’s grandparents lost their farm due to the failure of the bank where their money was held during the Great Depression. They were unable to pay the property taxes, leading to the eventual loss of their home. This story has been passed down through generations, serving as a reminder of the importance of keeping one’s assets in a secure and reliable form.

My wife’s grandmother and others in the family have kept physical cash throughout their lives as a precautionary measure, believing that it is a safer and more secure means of managing assets. They have found money in various containers, often enough to cover their financial needs multiple times over. This hands-on approach to cash management has become a family tradition, passed down through generations as a response to past financial instability and a way to protect assets from potential risks.

While the preference for physical cash over bank savings is understandable, it is important to weigh the pros and cons. Banks offer the benefit of interest earnings, the security of insurance and deposits, and the convenience of managing finances through digital means. For those who choose to keep physical cash, it is crucial to balance personal security concerns with the potential risks involved.

Conclusion

Whether it is due to legal and financial concerns, distrust in banks, or personal history and experiences, the preference for keeping money in physical form remains a significant behavior in today's society. While it offers a sense of security, it is important to be aware of the potential risks and to strive for a balanced approach to managing one's financial assets.