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Tuesday, September 23, 2008

Should You Keep Some "Under the Mattress" Money At Home?

"Shrewd is the one that has seen the calamity and proceeds to conceal himself, but the inexperienced have passed along and must suffer the penalty" - Proverbs 22:3

Yes, this is a question that I have been asked, as of late.

"Should I be keeping some money at home? Just in case ... you know ..."

It seems that people do not want to speak the words out loud. That ...

" ... yes, my financial institution could some how be connected in this intricate weave and web of financial troubles. That I may not be able to access my funds."

They just can't seem to finish the question. They trail off their words. But we understand what they mean. In the back of their mind? They are thinking it.

What ... if ... ?

Is there a risk your financial institution could go under? Yes. Then if there is a risk, then you need to give this area some thought. Banks and other financial systems are going under. I'm not sure if the United States has ever seen the financial upheaval as it has in the last 120 hours. First of all, remember that your cash is insured to $100,000.00. And if the government has proven anything in the last 120 hours? It's that they will print as much money as possible to insure financial institutions such as the FDIC (But that's an entirely different discussion).

But we return to the question posed in the title of this blog entry. Should you have some money around the house due to a financial collapse?

In a word? No. For any course of action, you need a plan, and a strategy. So, ... let's look to the basic risk / reward situation here. If everyone pulls their money out of the bank? We have financial armageddon. Period. That's what we call a "nationwide bank run" ladies and gentlemen, and the results are beyond catastrophic. So it would be the height of foolishness to keep all of your money at home. That's risk number one. Destruction of the economy. Literally.

In addition, it's foolish because their is a risk of security. A thief has a much easier time robbing you of your money in your home, than he does at the bank. As we said earlier, at the bank? Your money is insured. At home? It's gone.

The greatest financial risk with keeping your money at home? Is that you earn nothing on your money. There is no interest, absolutely no possibility of a reward. Zero. In fact, as the Federal Reserve prints off money faster and at a speed never before seen? It's a losing proposition. Inflation is what? 5.37%? You are literally becoming more poor, by just holding your money at home.

Now. That being said? Should you keep some money at home?

In a word? Yes. It is extremely wise to keep a couple of stacks of $20's at home, for entirely different reasons. What reasons are those? Well, I'll talk about those reasons in the following video ...

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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