Why is it irrational to keep all savings in cash dollars?
Keeping savings in the USD is a common practice around the world. The benefits of this asset are well-known. That is why it has become very popular. However, it also has a number of disadvantages. Let’s consider them.
Relative stability
The standard way of estimating cannot be applied to the dollar. After all, the currencies of other countries are characterized in comparison to the USD. The ratio to the dollar shows their rise or fall.
In the U.S., inflation has been about 2% a year for the last few decades. So we can assume that the purchasing power of the U.S. currency in the consumer market is also declining.
The dollar is not constant against gold either. For example, in 2009 you could buy 3.20 grams of gold for $100, but in 2018 you can buy only 2.45 grams. Of course, the dollar is more reliable than most currencies and assets, but we cannot speak of absolute stability.
Cash savings do not grow
Let’s imagine a situation where you own a few hundred dollars. For several weeks or months, you go to an exchange office every day to buy another currency for $10. You may notice that the amount of money you get for an unchanged number of dollars varies over time.
This amount can go up as well as down. However, such fluctuations are possible only in the short term. On average, the currencies of developing countries depreciate against the dollar by 5% a year.
Income from cash dollar savings can become less interesting compared to other types of savings. It is due to the fact that this growth is based on the depreciation of other currencies.
Storing of cash
There can be many variants. But each option is based on only two ways. The first way is to worry about the safety of your money by yourself. In this case, you have to consider all the risks. Pay attention to the statistics of thefts, robberies, and burglaries. Also, damage to banknotes due to fire, flooding and other reasons is an everyday occurrence.
The second way is to entrust the storage of your cash to specialized institutions. Then you will have to pay for security on a regular basis. The essence of possessing cash is lost. Because it loses the ability to exchange money for other goods quickly.
Requirements of financial monitoring
With large funds in the form of cash dollars, it is not always easy to pass inspections and show where the money came from. You have to keep all the supporting documents that show the payment of taxes due.
Damaged banknotes
If your dollars are damaged by rodents, mould, or fire, most banknotes can be exchanged without problems at banks. But you can only do this at the U.S. banks within the United States. Once again, you have to prove the origin of the cash.
Customs restrictions
Each country sets its own limit of imported and exported currency per person of any age. You can have a quick conversation with the customs control officers. Or you can go through the “Red” channel. It all depends on the amount of cash dollars. And again, the staff will ask you to show all the necessary documents.
Nowadays, the banking sector and the stock exchange provide a large list of tools for storing, saving and convenient use of money. Electronic payments to another part of the world are made instantly. Investing in stocks can quickly increase your capital. Gold is resistant to the influence of rodents and mould. In this connection, you should not get hung up on only one option. After all, diversification can bring more significant results.
