Increasing numbers are stockpiling cash under the mattress, the Bank of England reports, but experts warn against the practice.
Cash is being used less for transactions during the pandemic and more as a way to hoard wealth, the Bank of England claims.
Sarah John, chief cashier at the Bank, says this has accelerated during the coronavirus crisis. Between eight and 13% of people are now holding more cash at home.
John was speaking to MPs at a public accounts committee hearing as part of its inquiry into the use of cash and the impact of a shift to a cashless society.
She told MPs that cash withdrawals have dropped during the pandemic but deposits have fallen even more.
John says this is due to the changing ways that cash is being used.
She says: “A fall in deposits means you get an increase in number of notes in circulation.
“The demand for notes in circulation has been going up since the beginning of the 1990s even as the use of cash has gone down.
“Cash is being used less for transactions and more as a store of value and that has accelerated during the crisis.”
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She said cash was withdrawn as a contingency in the same way people stockpiled toilet roll as lockdown approached in March.
Additionally, she says those who were shielding have been using cash to pay people to get supplies. Many sole traders, such as gardeners and window cleaners, have been paid in cash but are not always depositing this into banks.
But experts warn people should be careful about hoarding too much cash.
David Macdonald, founder of advisory firm The Path, says: “Cash under the mattress does not keep pace with inflation so the purchasing power goes down in real terms.
“The only way to keep up with inflation is to stay invested in real assets that can compete. Plus cash is insecure – if you literally hold cash you can be robbed.”
Justin Modray, founder of Candid Financial Advice, adds: “If you have cash outgoings and are trying to avoid going out unless absolutely necessary, then holding more cash than usual to avoid trips to the ATM is very sensible.
“However, it’s important to be careful, if you don’t have a safe to store it in then keep the money in a well-hidden place.”
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