Today’s One Sure Savings Success in a Nightmare: The Mattress!


Even as late as the end of this past September, many pundits and investment managers were advising clients not to pull out of the market and not to place their money under the mattress.

Yet considering the events of the last six months, when so many have lost so much in the horrible market, people hoped that they would have done that very thing: Grab the cash and hide it under the bed.

By mattress, some mean safe havens — such as savings accounts, those insurable CDs or the always popular U. S. Treasuries — even though the latter pay nearly zero percent interest. And in this banking crisis, are even those savings instruments safe?

Jerry Sloane, a CPA from Long Island, N.Y., cautions that even the mattress is a risk: "Robbers can burglarize your house — look under the mattress; haul away the cash; crack your safe and get your green."

Other investment managers chime in that a fire, too, could, in the process of destroying your house, take your mattress and all that money you put in it.

By the way, that money? Don't forget it "won't earn interest" in a safe spot under your cushion, points out Michael Schwartz of Schwartz Financial Services, located in Jenkintown.

"We're in such extreme circumstances," says Jules Vachon of Spears, Abacus Advisors, LLC, in New York City, "that what you are doing by putting money under the mattress is … betting against the survival of the financial system, and historically that has never been a good bet."

But there's another reason people are talking about mattress-savings and that's none other than: cash.

"Cash is the only vehicle to have when you don't know what tomorrow brings," according to Lewis Burke Frumkes, who in the past was a limited partner in a Wall Street firm, and is now a prominent author and radio-show host in New York.

As everything is going down, the value of cash is going up, explains Frumkes. "Put your cash in a place where you have access — a place where you can get it within 24 hours."

He feels that everyone should now have a cash reserve and, if not, start accumulating it.

But remember, argue a number of other financial advisers, if the country hits an inflationary spiral in the future, that cash under the bed or in a vault does not earn interest, and thus its dollar value is less.

There are those who feel that there are still opportunities in risk-based assets. Vachon says that a small percentage of one's assets, say 10 percent, should go to buying equities.

"The market is in a sale mode," says Schwartz. "It is undervalued now."

He stresses that one should have a diversified portfolio, also known as "diversified asset allocation."

Is It Safe?
He and others emphasize that the idea of placing money under the mattress was prominent in the Great Depression. When the banks failed, depositors lost their money. But these days, the FDIC protects savings up to the coverage of the insurance.

In this stormy financial climate, some are not even sure that CDs are safe. Sloane strongly disagrees with that.

To protect the banking system, he notes, the government has a number of options available to it.

Such as? It "can print any amount of money it wants. The idea has even been floated that the government could conceivably nationalize the banks."

In talking to several brokers, one comes away with the truly uneasy feeling that a public lack of confidence now exists in financial markets that didn't once before.

Thus, Howard Werbrock, CPA, of Valley Stream, N.Y,. observes that more people are saving.

"There is a general mood of conservatism, capital preservation and safety," says the Long Island accountant of what may prevent the market from getting up a head of steam.

In the final analysis, after all is said and done, and as award-winning financial guru Joel L. Naroff, chief economist for TD Bank and a resident of Bucks County, points out, "There is no simple answer as to where a person should keep his money. It depends on what their willingness is to accept a certain level of risk. There is risk in anything we do."

Yes, even putting cash under the mattress, he agrees.

But rest assured, declares Naroff, "eventually, we will come out of this." 



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