Stash the cash. It’s a natural reaction. As much as loading bank notes under the mattress, stuffing cash in the sock drawer is a guilty pleasure, it’s not a wise habit to get stuck in and goes against the general trend cash-free transactional environment we now live in.
The Reserve Bank of Australia reported this week that cash hoarders have amassed $100 billion in bank notes over the pandemic – an addition of $20 billion in circulation from pre-pandemic.
The RBA believes economic uncertainty created by the pandemic, coupled with low interest rates, has led people to stockpile cash. However, the unusual combination of scenarios won’t last forever.
From the perspective of a financial adviser, stockpiling cash past the point of contingency or preparation for a significant capital outlay, is an investment opportunity lost. Idle cash isn’t going to provide meaningful returns for individuals, similar to setting cash in term bank accounts, which are currently accruing extremely low interest rates. What’s worse is with significant inflation looming, the real value of cash or buying power is going to erode significantly.
On the upside, if you are or have been stockpiling cash, it likely puts you in a comfortable liquid position to undertake investment planning, explore options and decide what level of risk you are willing to take and what yield environments are best suited to your financial goals.
Our financial advisory services can provide a balanced strategy across individual or combined yield environments to ensure you don’t squander opportunities to invest. So my advice is to be prepared to empty the coffee tin and look at the broad investment spectrum – with the assistance of a financial adviser to help you make the right decisions.