4 Reasons Millionaires Don’t Put All Their Money in the Bank
Written by
Gina Hagler
Edited by
Molly Sullivan
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Ever wonder where millionaires put their money? It definitely isn’t all being placed in banks. Considering the FDIC only protects up to $250,000 per insured bank, those with assets greatly exceeding that amount probably don’t find as much reassurance in that as the average earner. That being said, they are incentivized to avoid traditional banking more so for the lack of growth opportunities. Here are the different reasons millionaires store their money outside of banks.
Earning Potential
It’s common for millionaires to have a substantial portion of their money tied up in their real estate portfolios, according to SmartAsset. It offers them a way to invest their money and continue accruing wealth. This goes beyond homes to commercial endeavors like offices, hotels, casinos and plenty more.
Secure Return
Investment securities like CDs or Treasury bills also enable wealthy individuals to reinvest their money while having their cash maintain a degree of liquidity should they need to use it.
Stable Income
Millionaires often choose stocks or index funds to provide them with passive income through dividends. It’s a smart way to live off your passive earnings.
Need To Diversify
Some millionaires may exchange their money for commodities like precious metals like gold, silver or platinum. This is much less common than other options — gold accounts for around 2% of ultra-high net worth individuals’ (UHNWI, net worth over $30 million) investments, according to Knight Frank’s 2023 Wealth Report, courtesy of Visual Capitalist. Metals and other commodities, such as livestock, have added layers of complexity.
Collectively, homes and other property, equities, cash equivalents and private equity account for 76% of investments from UHNWIs. Those who are particularly wealthy might purchase a private equity fund to receive investments from institutions. Alternatively, they may opt for a hedge fund. Alternative investments also include lucrative tangible assets — rare books or fine art — and intangible ones, like the rights to certain IPs. The fact that these items can require storage partially accounts for why they’re less common.
All of these items allow millionaires to diversify their money, so that if one area is failing, it might be supported by another area that’s succeeding.
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