Spanish Bank advises on cash reserves

by Lorraine Williamson
cash reserves

MADRID – As technological advancements in payment methods continue to emerge, the reliance on physical cash reserves is steadily declining. Transferring small amounts via Bizum, integrating bank cards with mobile phones, and the ubiquitous acceptance of card payments have all contributed to this shift. 

Historically, many people stored cash at home as a precaution for unforeseen events. However, as cashless transactions have grown in popularity, this tradition has waned. Yet, in a surprising move, the Banco de España continues to recommend keeping a certain amount of cash on hand for emergencies. 

Cash reserves

However, storing money at home does come with its risks. The most significant of these is theft. Burglars, when breaking into homes, often conduct thorough searches. No matter how ingenious one believes their hiding spot to be, there’s always the possibility that thieves might discover it. 

Apart from theft, homes are vulnerable to natural disasters like floods or fires. During such events, there might not be enough time to retrieve hidden money. This could result in substantial losses unless homeowners have insurance coverage that includes cash holdings. Yet, proving the presence of hidden cash during an insurance claim can be challenging. 

Cogesa Expats

Inflation and its effects 

Another aspect the Bank of Spain highlights is the impact of inflation on money’s purchasing power. As prices surge, the real value of cash depreciates. Consequently, as living costs increase, the same amount of money buys fewer goods and services. 

However, the Banco de España hasn’t specified an exact amount one should store at home. This largely depends on individual households, their income, and routine expenses. But, the amount suggested by the Banco de España is notable. They recommend an amount that can cover between six to twelve months of fixed monthly expenses. 

Accessibility of cash payment 

Despite the rise in digital payments, the Banco de España reiterates that cash remains a viable option for all, especially those without bank accounts or other payment alternatives. While there’s no upper limit to cash possession, there are constraints on cash transactions. Anti-fraud legislation has decreased the cash transaction limit between businesses and individuals from €2,500 to €1,000. This is in stark contrast to the European Commission’s set limit of €10,000 for member states. The European Central Bank has labelled Spain’s limits as “disproportionate,” believing they excessively restrict payment method choices. 

Related article: Spain pioneers digital rental payments, banning cash transactions 


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