This article appeared in The Australian on 4th October 2022 and was written by Anthony Keene

If you like hoarding coins in a jar, hiding notes under a mattress or stashing cash in a safe at home, now is the time to think twice about it.

The return of high inflation in Australia for the first time in more than 30 years is eating into cash holdings, and many people do not realise its impact on their wealth.

The official inflation rate for 2021-22 was 6.1 per cent, up from 3.8 per cent the previous financial year. Inflation currently sits near 7 per cent, and if that rate holds until June 2023, it would mean that every dollar you have at home will have lost nearly 18 per cent of its value in just three years.

“The buying power of that money is going backwards,” says MBA Financial Strategists director Darren James.

Savings accounts are starting to pay decent interest rates again, and James suggests people with long-term cash holdings look at putting money in growth assets – such as shares and property – that “tend to outperform inflation over time”.

He says younger people – who grew up in a digital world – are less likely to keep cash at home.

“It’s often a generational thing,” James says.

“A lot of older people tend to do it – one reason is they believe it’s safer than banks, while others do it for Centrelink purposes.”

Their argument is that if Centrelink can’t track your assets, it can’t reduce your pension, but James says hiding cash to fool the government can be “a false economy”.

“They don’t understand how those Centrelink metrics work,” he says.

There’s another danger in keeping piles of cash at home.

CreationWealth senior financial adviser Andrew Zbik shares the true story of an elderly gentleman who was moved into a nursing home, after which his family gave his home a thorough clean-up, including disposing old paint tins that were in his shed.

“He had $100,000 of cash in the paint tins and the family threw it all out,” Zbik says.

He says some people hold piles of cash without realising there are options such as fixed income that may be an inflation-beating solution for them.

“A lot of people don’t realise that they may be able to make a non-concessional contribution into super. Every fund has low-risk options, and you can get a better return for not an exceptional amount of risk.”