Despite years of soaring inflation and the rapid spread of digital payments, Hungarians continue to keep surprisingly large amounts of cash at home. According to a new study by experts at the Hungarian National Bank (MNB), the main reason is not everyday shopping but the desire for financial security during uncertain times.
The study, The Role of Cash in Household Savings, published in the June 2026 edition of the Hitelintézeti Szemle (Credit Institution Review), concludes that many households deliberately sacrifice potential investment returns in exchange for having immediate access to emergency funds.
Inflation did little to reduce cash holdings
From 2022 to 2025, Hungary experienced one of the highest inflationary periods in recent history, with annual inflation peaking at 25.7% in early 2023. Economically, this should have encouraged households to move their savings into interest-bearing assets such as government bonds.
Instead, the amount of cash held by the public declined only slightly. As inflation eased, both cash holdings and bank deposits began to rise again. According to the MNB researchers, this behaviour reflects a different way of thinking about savings rather than financial irrationality.
Emergency reserves come first
According to Portfolio, the study describes household savings as a hierarchy. At the base are emergency reserves designed to cover unexpected expenses. Above them are savings set aside for specific goals, such as buying a home, retirement or healthcare costs. Long-term investments occupy the top level.
Cash plays its biggest role in the first category. For many households, the priority is immediate access rather than earning interest. Researchers estimate that for households living on the median wage, this emergency reserve often amounts to around HUF 1 million (approximately EUR 2,500), with many people choosing to keep it in physical banknotes.
Security outweighs investment returns
The study found that cash provides psychological reassurance. Even though respondents understood that inflation reduces the purchasing power of money kept at home, many considered this a worthwhile price for the feeling of security.
According to MNB surveys:
- 66.7% keep cash at home for everyday expenses.
- 61.6% maintain it as an emergency reserve.
- Only 35% view it primarily as long-term savings.
- In another survey, 82% said they keep banknotes at home to prepare for unexpected situations, regardless of income or education.
War and uncertainty boosted demand for cash
The research also highlights how external crises influence cash demand. Following Russia’s invasion of Ukraine in spring 2022, Hungarians withdrew almost HUF 500 billion in cash within just three weeks as uncertainty surged. Although some of that increase later reversed, researchers say the episode demonstrated how quickly households turn to physical cash during periods of instability.
Distrust of financial institutions also plays a role
The report identifies several long-term reasons why Hungarians continue to prefer banknotes:
- concerns about economic uncertainty and possible job losses;
- distrust of banks and financial institutions;
- worries about access to money during crises;
- perceived high banking costs;
- and, in some areas, limited access to bank branches or post offices.
Nearly half of respondents cited some form of distrust in financial institutions as a reason for keeping cash at home.
Cash remains part of a broader savings strategy
The researchers stress that cash is not replacing investment altogether. When people save for longer-term goals, they are more likely to move money into government bonds or other investment products.
However, emergency cash is treated as a separate category that many households are reluctant to touch, even during periods of high inflation. Some households also keep part of their emergency reserves in foreign currencies, particularly euros or US dollars, as protection against possible weakening of the Hungarian forint.
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Building trust may matter more than financial education
The study concludes that simply encouraging people to improve their financial literacy will not significantly reduce the amount of banknotes held at home. According to the MNB researchers, increasing trust in financial institutions, improving economic predictability and making financial services more transparent and affordable would be more effective in encouraging households to invest their spare cash instead of storing it at home.
Here in small town it is very common to have cash around to pay for services. If you need a plumber/electrician/carpenter for a small fixing or renovation or garden work etc., cash is king. You can ask for an official quotation from a company and you get a high price estimate with a schedule that says “maybe the work can be done in a month or so but could be later”. But then there is that acquaintance of a friend of a friend, who happens to be a professional in the field, and after hearing about the work, the person says he/she will do the work for 35 % cheaper on next Saturday – if you pay in cash and don’t expect receipts. I am guilty, I have paid for replacement of windows and doors, transport services, hair dressers etc. in cash without receipts as it was the only way to get a professional to come by and do good work in an affordable price.
Cash is the way to get things done, at least here – no idea about Budapest or other bigger towns.
So for the major part cash is not just lying around in households waiting for a big disasters before using it, instead it is constantly used for small investments – improving your house or paying for other small services – while keeping some spare cash for surprise needs. And professionals are happy to take cash to avoid taxes and bookkeeping expenses – still quite common practice in Hungary for small household works.
What the article doesn’t mention but remains an important reason why people keep cash at home (even during times of high inflation) is the fact that they feel they simply cannot deposit it in the bank. If the origins are ‘money in an envelope’ to augment a low official salary, jobs paid in cash for the self employed and yes, in some cases it may even hail from bribes, people are afraid that by depositing the money into an account it’s a formal declaration that the money exists when they’re unable to account for it in a tax compliant manner. So it remains in a suitcase under the bed, losing value on a daily basis at times when inflation is elevated.
Rather than hoard this cash the best thing anyone can do is to spend it for daily expenses (groceries, fuel, visits to the hairdresser, et al.) while allowing their legal income to accumulate on a savings account but some people have an odd attachment towards keeping large sums of money at home for reasons the article touches upon. Fact is that nobody wealthy has anything more than a small amount of cash at home unless they’re gangsters.
I had a tradesman in Hungary give me two different foreign bank accounts to transfer payment to. They willl trust banks as long as they are not Hungarian. I bet most people with money try to keep a large part of it outside of the country. The other problem is the ridiculous fees Hungarian banks charge to take out your own money.
It’s not so much about trust, Larry, after all, money in a Hungarian bank account is protected up to 100k Euros per account in the unlikely event of the insolvency of the credit institution. Your tradesmen wanting to be paid to a foreign account will be about keeping the money away from NAV’s purview. To what degree this works I don’t know as I don’t do that kind of thing but I suspect the overseas (EU) bank has reporting obligations to the tax authorities in the country where the account holder has declared themselves as tax resident which might be as simple as the address to where they send statements. Even if NAV doesn’t find out, one can also get in bother with the tax authorities of the country where the account is held as they won’t find any corresponding local income declarations and it’ll be up to the account holder to prove that they don’t actually live there and therefore don’t have an obligation to pay taxes locally on that income. Many people think they’re being terribly clever with these contrived arrangements until they find themselves in hot water, drowning beneath the weight of investigations. When personal income tax is a mere 15% in Hungary not only does it strike me as not worth the risk and bother to avoid, it’s also mean spirited. Hungarians have a saying: you can only use a pale to carry water from the well until it breaks.