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Places Where You Can Keep Your Money

Susan Kelly

Sep 02, 2022

When people lose faith in banks and other financial institutions, they tend to look elsewhere to save their money out of fear. Others may be avoiding banks as a matter of principle after their complicity in the irresponsible lending that contributed to the collapse of the housing bubble and the subsequent Great Depression. Naturally, given last year's extreme volatility in the stock market, banks have started appearing safer. In any case, consider these seven more options.

Why Should Money Be Kept Outside of a Bank?

According to the FDIC's official website, no depositor has ever lost a dime of insured money since the FDIC was established in 1933. However, "$250,000 per depositor, per FDIC-insured bank, per ownership type" is the maximum amount covered by FDIC insurance.

In contrast, the S&''P 500 Index has returned an average of around 8% annually for investors over the previous 60 years. However, the long track record of positive returns from the stock markets is riddled with downturns that disturb some investors' faith.

Federal Bonds

Investing in securities issued by the U.S. Treasury or Federal Reserve is a highly secure bet. Most financial texts still consider a U.S. government bond a safe investment option. Bond rates are extremely cheap because many other people and institutions have joined the market ahead of you, anticipating the crisis. A record low 10-year Treasury note yield of 0.73% was reached on April 9, 2020. If the low-interest rates are acceptable, government bonds are one of the safest locations to store money. 3

Real Estate

Bank and stock market investors may find the appeal of real estate investing particularly powerful during these times of uncertainty. Don't just sit on the sidelines, do something productive. One strategy for paying off a mortgage is putting down a sizable chunk of the total, doing a few repairs, and then renting out the place.

You might also consider house flipping if you're looking for a more short-term opportunity and already have some expertise in the field. When managed properly, real estate may yield substantial gains. Still, it's not without its risks and its volatility. Real estate, however, is not always a safe bet, especially in the short term. The housing bubble that eventually burst and caused the Great Recession is a very dramatic case in point.

Precious Metals

Gold, silver, and other metals such as platinum or copper would presumably still retain or even increase in value if the end of the world saw the collapse of the banking system. Although the prospect of returning to a barter system based on actual things is low, it may be prudent to save some portion of your wealth in this form just in case. One reason is that precious metals tend not to follow the decline in value of other asset classes like equities and bonds and, in certain cases, may even rise in value.

High-End Possessions

Fine art, vehicles, watches, diamonds, other gems, and essentially anything else that might be considered collectable fall under this broad category of physical goods. Unlike a bank account statement, which may be difficult to collect if the bank that held it goes out of business, these items may be seen and handled.

However, high-end investments are not always a safe option. While the information on their historical returns is scarce, it is widely accepted that they trail stock market returns and have times of fast appreciation when their underlying demand surges owing to great financial market performance or periods of popularity.

Cash, Hidden Away

Though it's a cliche to say this, having your cash beneath the mattress will keep it close to reaching, though not exactly safe. Of course, you may also store your valuables in a safe or security deposit box. Again, this approach is probably only appropriate in a worst-case situation or during times of temporary cash shortage. Even so, it's best to have a very small emergency fund, as inflation gradually eats away at the purchasing power of money over time.

Summary

Even though it's been over a decade since the subprime mortgage crisis, some still view the banking sector with scepticism. And the stock market could be just as much of a worry for them, what with the recent and current unparalleled volatility. The options, as mentioned earlier, to putting all or most of one's money in a bank or the stock market may make sense for the extra cautious for at least some of one's wealth.


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