Won't the advice to keep a cash reserve at home affect the economy?

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If a large amount of cash is taken out of circulation, what is the impact on the economy?

If every adult hoards £100, that's £5.5bn taken out of the economy?

That’s a really good point and some people will take more!

It could produce a bit of a squeeze on cash in circulation.

From the web, there is about 100 billion of banknotes in circulation.

If 70 million people withdrew an extra £100 then that would be about 7 billion, so 7% of the money in circulation.

Of course not everyone will withdraw that money, because lots of people have a small amount of cash anyway. So if you assume maybe 50% of people would do it, that would be about 3.5% of the cash in circulation.

Of course the cash not in banknotes (M4) is much bigger, trillions probably.

So no it would not significantly affect the economy IMO but might cause a few short term issues in getting enough banknotes.

Is this related to all this stockpiling stuff? All of this is excellent for the economy.

Yes, I can imagine some people will go overboard and react to this advice by keeping much more than £100 too though.

Yes, good point. Loads of people buying things they'll (hopefully) never use will be good for the economy.

Most of the money circulating in the economy isn’t cash, so I can’t see it making a difference really

Remember 70 million is the population of the UK but 3 year olds are unlikely to be rushing to the ATMs.

My guess is that the government keeps a stash of banknotes anyway ready to supply if needed. You wouldn't need much space. Apparently you can fit £1 billion in a small truck, so the goverment could store probably an amount equivalent to the whole UK circulation in a large house.

Yes, that's why I based it on 55m, the adult population.

We keep cash at home anyway so won't be getting extra out unless we had spent it.

meh

I don't really see any difference to the economy in me having £100 cash in my house vs it being in a savings account? It's only affecting the economy if I was otherwise going to spend it but now do not?

Coinage might cause more of a problem. If everyone rushes to the shops to buy their load of bread with £20 notes they have extracted from the atm there may not be enough small value coins around to provide adequate change to everyone.

The machines which spew out banknotes are sure subject to electricity blackouts.

That will be offset by the large percentage of the UK who have no/minimal savings.

Yes, that's (one reason) we're advised to keep some cash.

No more money will be created if there is less in circulation. This happens automatically as a result of inflation targeting through interest rates.

correct. or certainly an instant access/current account

You do know it's a common government ploy? Panic buy - it boosts the economy!

I don’t really understand this

It’s pretty normal to have £50 or £100 stashed away for some kind of emergency isn’t it? Why would it affect the economy? If you’re old enough to remember, then you didn’t used to be able to pay taxis or whatever by card. If you’ve got locked out and you had to pay a locksmith or something… yes that has happened to me…. Then you have emergency cash for stuff.

I didn’t realise how many people didn’t have emergency cash.

It's pretty normal and sensible to have "rainy day" savings?? Having it at home instead of the bank won't make any difference to the economy.

That won't happen though, will it?

I guess it depends where the cash comes from. I have savings accounts but my spending money comes from my current account. If, this month, I take some out to keep in a drawer, that's £100 (or whatever) I'll have less to spend. I won't take the £100 from savings, I'll just buy fewer shoes (or whatever).

MOst people are in couples though, and I doubt many of them will be taking £100 each

The only issue is burglars looking to get cash from people's homes, so increase in security would be a good idea.

I always thought muggings would be difficult now as noone carries cash around. But there's always some petty criminal willing to nick your phone or something.

I don't think everyone does. If I rooted around I'd probably find £20 in cash at home.