7 Best Places to Keep Your Money 

7 Best Places to Keep Your Money 
7 Best Places to Keep Your Money 

Are you tired of banks and the stock market? Consider the following best places to keep your money. 

People who have mistrust towards banks and other financial organizations are more likely to look for other places to park their money out of fear. 

Considering that the banks were involved in the careless lending that preceded the housing bubble burst and started the Great Recession, some people might be avoiding them out of principle.

Naturally, banks now appear safer following the extremely turbulent stock market of the previous year. Nevertheless, it’s worthwhile to consider these seven options. One in particular is thought to be the safest location to store cash.

NOTE

  • In hard times, banks seem attractive because of the FDIC insurance for deposits, but there are other places to invest money.
  • Despite having extremely low returns, federal bonds are thought to be quite safe.
  • Although it might be dangerous, real estate can generate revenue.
  • Gold and other precious metals provide an alternative to equities and bonds.
  • Although they trail stock market profits, luxury assets are tangible.
  • Cash that is hidden is not safe and eventually loses value due to inflation.
  • Farms and other businesses offer additional places to invest money.
  • Although it’s a new option, cryptocurrency has risks of its own.

What Places Do Banks Put Their Money?

In exchange for a small interest rate, banks provide their clients with a secure location to store their cash. The banks then invest that money in an effort to generate larger returns. 

Above all, they earn from the interest payments by lending it to consumers and businesses as loans. The fees they charge their clients for different services is another source of revenue for them.

Furthermore, banks directly invest a portion of their funds in stocks, bonds, and real estate.

Keep in mind that the largest banks of today offer both commercial and investment banking services. That’s a completely different source of income that includes financial management and high-end private client consultancy.

Why Keep Money Outside of the Bank?

Even with the unmatched protection provided by FDIC insurance, some people continue to look outside of banks. Basically, it comes down to going above and beyond the $250,000 coverage per bank, looking for investment possibilities that can yield higher returns, or diversifying their safe havens for extra security. In essence, they are giving up assured safety in favor of longer financial perspectives.

A return of almost 8% has been achieved on average over the last 60 years by investing in the S&P 500 Index, however. Though there have been several downturns that have shaken some investors’ faith, the stock markets have a lengthy history of strong returns. 

Throughout 2018, for instance, the majority of stock indexes saw a decline of 4% to 6%. Before we reached the market declines brought on by the economic crisis, that record had been the worst in ten years.

Seven options are listed below if you’re still searching for other places to put your money:

1. Federal Bonds

In exchange for your money, the Federal Reserve and the U.S. Treasury would be more than pleased to give you securities—and very safe ones at that. Most textbooks still classify a U.S. government bond as a risk-free investment.

Unfortunately, a lot of people and organizations are already aware of this and were early entrants into the bond market, which has driven down bond rates to extremely low levels throughout this crisis. 

The yield on a 10-year Treasury note hit an all-time low of 0.73% on April 9, 2020. Government bonds are among the safest locations to keep money, if the low rates don’t scare you away.

2. Real estate

Investing in real estate can be very appealing, especially during uncertain times for the stock market and banks. Take up landlording. After making some repairs and putting down some of the principal, you can rent the property out and have the tenants pay down the mortgage. Alternatively, if you have more experience and would prefer a shorter-term job, consider flipping houses.

Properly managed, real estate can yield significant financial benefits. However, investing in it can also be dangerous and occasionally erratic. Indeed, during the last two decades, the average return on residential and diversified real estate investments has been roughly 10%, which is marginally higher than the S&P 500 during that same time frame. 

However, real estate may also be a risky investment, particularly when it comes to short-term gains.

An exemplary case in point is the housing bubble burst, which precipitated the Great Recession. A housing market meltdown followed the millions of people who lost their jobs and homes as a result of the worldwide economic slump that started in 2007.

It’s unknown how the present status of the economy will ultimately impact real estate values. Buyers’ ability to come up with cash and motivation to part with it will probably be limited due to the severe blow to the economy and employment.

However, sellers who are in a desperate situation might be open to accepting a lower offer. Furthermore, relocations brought about by persons who began working from home and left pricey, claustrophobic center-city homes have benefited suburban and exurban areas across the nation while depressing property values in other cities.

3. Precious Metals

Gold, silver, and other metals like platinum or copper are predicted to keep their value, if not increase, in the future where financial markets collapse.

Although there is little chance that you will need to switch back to a barter system for tangible items, it can make sense to retain a portion of your assets in this manner. Historically, precious metals have not performed well in relation to other asset classes such as stocks and bonds. 

This means that when other assets perform poorly, precious metals are unlikely to perform poorly either, and in some cases, their value may even rise.

4. Luxury Properties

Fine art, automobiles, watches, diamonds, and other gems, as well as nearly everything that meets the criteria for being a collectible, are all included in this category of physical assets. 

They have the advantage that they are tangible items that can be handled and observed, as opposed to bank account statements, which may take some time to be collected in the event that the financial institution holding them closes.

Nevertheless, luxury investments are by no means guaranteed. Although exact data on their past returns is difficult to come by, they are generally believed to have underperformed the stock market during times of strong financial market performance and periods of rapid appreciation brought on by periods of increased popularity or underlying demand that drives up prices.

5. Cash, Disguised

Stuffing cash beneath your mattress may seem cliche, but it does keep your money accessible, if not necessarily safe. Of course, another option is to conceal your belongings in a safe or safe deposit box.

Once more, this approach most likely only makes sense in a catastrophic event or during brief periods of low liquidity. Even then, only hold a little amount of cash, in part because inflation gradually reduces the purchasing power of money over time. Naturally, the opposite is true during a deflation.

Quick Fact

There is no insurance on money kept in safe deposit boxes.

6. In an Enterprise, Possibly a Farm?

Purchasing a business can guarantee a return on your investment—that is, if the company turns a profit. Naturally, businesses also suffer during extremely difficult circumstances. A farm, even if it’s not consistently profitable, may be a very tangible business.

Additionally, you don’t have to get your hands filthy because, on a so-called investment farm, employees are hired to manage the real agricultural operations. A survivalist attitude can also be well-suited to farmland ownership, as it can yield food in the unlikely event of a worldwide disaster or collapse of the banking system.

7. Cryptocurrency

Cryptocurrencies are another alternate investment choice. There are several options; the most well-known is Bitcoin. So-called “cryptos” present a special chance for ordinary investors to invest in a technology that is still very much in its infancy.

This is undoubtedly a high-risk, high-reward proposition as well. For instance, in 2018 bitcoin lost about three-quarters of its value after reaching stratospheric highs. It is not advisable for you to invest a significant amount of money in cryptocurrencies that you will need later on. 

However, the majority of analysts think that these alternative currencies are here to stay, so daring investors might want to put up some money in the hopes of making a fortune with one of them.

In summary 

Even after more than ten years have passed since the subprime mortgage crisis, the financial sector is still viewed with some mistrust, at least among some doubters. Those who are concerned about the stock market might also be concerned about it, especially in light of the recent extraordinary volatility the markets have seen.

The aforementioned options to a regular bank or equities might make sense for those who are very cautious, at least in terms of a portion of their net worth. However, none should account for an excessive amount of your investments due to their danger.