How to Store Money Without a Bank

Ever felt the need to keep your hard-earned money somewhere safe, but not in a traditional bank? You’re not alone. Many people are seeking alternatives to traditional banking, especially in an age where digital and decentralized solutions are on the rise. While banks have been our go-to place for savings, checking, and other financial needs for years, there are valid reasons why someone might want to store their money elsewhere.

We’ll see how to keep your funds safe without relying on a bank.

Further Tips on Storing Money Without a Bank

You might be considering different ways to manage your money beyond traditional banks. Every option comes with its own set of advantages and drawbacks. With this guide, we’ll provide you with clear insights and examples, helping you make the best decisions for your financial journey.

Peer-to-Peer Money Platforms

Beyond the realm of conventional banks, peer-to-peer platforms have emerged as modern titans in money transfers, providing swift, seamless experiences that often don’t necessitate traditional bank accounts.

Examples: PayPal, Venmo, Cash App, Zelle

👍 Pros

• Quick and easy money transfers.
• Many offer no fees for personal transactions.
• Accessible via mobile devices and online.

👎 Cons

• Some charge fees for international transactions or business services.
• Might lack the same level of insurance and protection as banks.
• Dependency on Internet access.

Keep your accounts safe:

• Always set complex and unique passwords for your accounts. I recommend a password manager like LastPass or Dashlane. They generate unique, strong 12+ character passwords.
• Check your accounts frequently for any unauthorized activities.
• Ensure the app is updated regularly to have the latest security features.

Banking Alternatives: Credit Unions

Unlike banks, which operate for profit, credit unions represent a collaborative financial model where members pool resources to offer banking services, often with a more personal touch and community-oriented perspective.

Examples: Navy Federal Credit Union, Alliant Credit Union, PenFed

👍 Pros

• Often offer better interest rates than traditional banks.
• Personalized services due to community focus.
• Profits are returned to members through reduced fees and better rates.

👎 Cons

• Might have fewer ATMs and branches.
• Some services might be less advanced compared to bigger banks.
• Membership requirements can sometimes be restrictive.

Digital Financial Platforms

In the digital age, online-only banks and fintech platforms have risen in prominence, offering a fresh approach to banking. With no physical branches, they leverage technology to offer user-centric services, typically at a fraction of the cost.

Examples: Ally Bank, Chime, Robinhood, Wealthfront

👍 Pros

• Competitive interest rates.
• User-friendly apps and interfaces.
• Reduced overhead often leads to lower fees.

👎 Cons

• The lack of physical branches can deter some.
• Customer service might be chat or phone-only.
• Some might lack a complete range of banking services.

Safekeeping at Home

While seemingly old-fashioned, physically storing money at home remains a choice for many who prioritize immediate access and privacy. Modern home safes blend traditional security with advanced features, ensuring valuables are well-protected.

Examples: SentrySafe, First Alert, Fort Knox

Types of safes to consider: Fireproof safes, wall safes, floor safes.

👍 Pros

• Direct access anytime.
• One-time expense without ongoing fees.
• Privacy of financial matters.

👎 Cons

• Risk of theft or natural disasters.
• Money doesn’t grow or accrue interest.
• Large sums can be challenging to manage.

💰 Safe Safety:

Ensure the safe is in a concealed location in your home. If possible, bolt the safe to prevent it from being easily removed. Choose a fireproof safe to protect your assets from potential fires.

Active Investments

Rather than merely storing money, active investments involve channeling funds into assets with the potential for growth. From stocks to mutual funds, these vehicles provide opportunities for wealth accumulation over time.

Examples: Stocks (like Apple or Amazon), Bonds, ETFs (I recommend them in almost all cases; VOO is my best-returning fund currently), Mutual Funds

👍 Pros

• Potential for higher returns compared to regular savings.
• Diverse options to fit different risk appetites.
• Can be liquidated when needed.

👎 Cons

• Market volatility.
• Requires some level of financial knowledge.
• Potential for loss.

Importance of Diversification

In the financial world, diversification isn’t just a buzzword. By dispersing funds across multiple storage methods, individuals can significantly mitigate risks and harness the strengths of various platforms and investment vehicles.

Examples: Holding multiple currencies, a mix of digital wallets like Apple Pay and Google Wallet, physical storage and real estate.

👍 Pros

• Reduces risk by not putting all eggs in one basket.
• Potential for growth in one area can offset losses in another.
• Provides flexibility in financial strategies.

👎 Cons

• Requires more active management and oversight.
• This might lead to spread-out and fragmented finances.
• Some methods might require more knowledge and understanding.

Cryptocurrencies

Cryptocurrencies like Bitcoin, Ethereum, and others offer decentralized means to store and transact money. While they are technically not “stored” in the traditional sense, they can be kept in digital wallets and can act as both an investment and a currency.

Examples: Bitcoin, Ethereum, Litecoin, Ripple and probably 10,000 more altcoins.

👍 Pros

• Offers complete control over one’s funds.
• Potentially high returns due to market appreciation.
• Anonymity and privacy in transactions.

👎 Cons

• Volatile and unpredictable market values.
• Requires understanding and caution, given the risks of scams.
• Not universally accepted for all transactions.

Platforms to consider: Coinbase (regulated marketplace), Binance (unregulated), Kraken (unregulated).

How to keep your Crypto safe

Not your keys, not your coins!

Every hardcore crypto millionaire out there

• Use Hardware Wallets. Consider storing your cryptocurrencies in hardware wallets like Ledger Nano S or Trezor. These are physical devices that keep your funds offline, making them immune to online hacks.
  • ⚠️ Warning: You might want to be careful if buying a hardware crypto wallet from anywhere else other than the official website (I linked them above for Trezor and Ledger). Getting them anywhere else (like Amazon for example) might be unsafe to your funds (they could come pre-installed with hacks).
• Enable Two-Factor Authentication. Always turn on 2FA for your crypto accounts to add an extra layer of security.
• Backup and Encrypt. Ensure you have backup keys and use encryption methods.

Using Gift Cards and Prepaid Cards

Gift cards and prepaid cards can be used as a means to store money, especially for specific purposes or vendors.

Examples: Visa/Mastercard Gift Cards, Amazon Gift Cards, Walmart Prepaid Cards

Where to buy: Retail stores, online marketplaces, bank branches.

👍 Pros

• Easily available and can be gifted.
• Can help in budgeting for specific needs or vendors.
• Generally safe from external financial fluctuations.

👎 Cons

• Often limited to certain stores or services.
• Might have expiry dates.
• Some might come with fees or maintenance charges.

The safest way to use gift cards or prepaid cards:

• Use Immediately. These cards can lose value or become non-functional over time. The sooner you use them, the safer.
• Register Online. Some cards allow for online registration which can offer protection if the card is lost or stolen.
• Store Securely. Treat these cards as cash and keep them in a safe location.

Barter Systems

Sounds weird right? I mean what is this? Fallout 1? While an ancient practice, the barter system is making a comeback in some communities. Here, goods and services are directly exchanged without the use of money.

Examples: Local community barter networks (aka local exchange trading systems) or other online barter websites.

Note: Even though experimental “local” community currencies like Ithaca Hours in New York or the Bristol Pound in the UK were in play, most are now extinct and not available anymore. So thread carefully if you find up-to-date new projects. They might not be around in a few years. Probably just stick with online barter websites.

👍 Pros

• Direct exchange without the need for a medium (money).
• Can build strong community ties and trust.
• Useful in situations where currency isn’t available or is devalued.

👎 Cons

• Requires a mutual need/want for the goods or services being exchanged.
• Value perception can be subjective, leading to potential disputes.
• Not scalable for larger transactions.

Commodity Money

Certain tangible commodities have been historically used as a medium of exchange, like gold, silver, or even items like tobacco in certain cultures.

Examples: Gold bars, Silver coins, and historically traded commodities.

👍 Pros

• Physical value that can be seen and touched.
• Often less volatile than paper money.
• Historical precedent for value.

👎 Cons

• Requires safe storage and protection.
• Not easily divisible or usable for everyday transactions.
• The value can still fluctuate based on market demand and global situations.

Where to buy: Local jewelers, online platforms like JM Bullion or APMEX.

How to keep your Physical Commodities safe:

• Safety Deposit Boxes. Consider renting a safety deposit box at a reputable institution if storing gold or precious stones.
• Document Everything. Keep a record of your purchases and consider photographing items.
• Insurance. Check if your homeowner’s insurance covers these commodities or consider a separate policy.

Regulatory and Insurance Considerations

As with any financial decision, understanding regulations and insurance is important. Different storage and investment methods come with varying degrees of protection, and being well-informed can make all the difference in ensuring one’s assets are secure.

Just to offer some personal insight into this, one of the startups I co-founded had the accounts over at Silicon Valley Bank. When SVB went under recently, our company was in bad shape, funds wise.

Since all funds were blocked (or actually, seemingly “lost”, since it was a bank failure), we had no access to the funds and also no real hope that funds were going to be recovered (we weren’t even sure we’d be able to get at least the 250k guaranteed by FDIC). We were lucky, since it was a bailout, and all funds were recovered, eventually.

We took steps to diversify our funds after this. We worked with fintech products (Wise Business + Mercury with their sweep network feature which offers up to $5M in FDIC insurance) as well as traditional banking (3 accounts at 3 different big US banks, to have 750k FDIC insurance) + government bonds (funds we were sure we won’t need for at least 1 year), to be more secure.

Examples: Federal Deposit Insurance Corporation (FDIC) for banks, Securities Investor Protection Corporation (SIPC) for brokerage accounts.

👍 Pros

• Protection against institutional failures.
• Set standards can lead to safer practices by institutions.
• Peace of mind for stored assets.

👎 Cons

• Coverage limits might apply.
• Not all platforms or methods might be insured.
• The responsibility is often on the individual, to be informed and cautious.

Where Millionaires and Billionaires Typically Store Their Money

The ultra-rich don’t just store their money under the mattress or in a single bank account. Their wealth management strategies are diversified and spread across various vehicles to grow and safeguard their fortune.

Investment Accounts

Brokerage Accounts. Many wealthy individuals invest in stocks, bonds, and other securities through brokerage accounts. Examples of prominent brokerage firms include Charles Schwab, Fidelity, and E-Trade.

• Pros: Potential for high returns, liquidity.
• Cons: Market volatility.

Real Estate

Residential and Commercial Properties. Wealthy individuals often have vast real estate portfolios, ranging from luxury homes to commercial properties. They might work with realtors like Sotheby’s or commercial real estate giants like CBRE.

• Pros: Asset appreciation, rental income.
• Cons: Illiquid, requires maintenance.

Private Equity and Hedge Funds

Investment in Companies. The rich frequently put money into private equity funds that invest directly in private companies or buyouts. Similarly, hedge funds offer a diversified portfolio but may have high risk-reward.

• Pros: Potentially high returns, professional management.
• Cons: Less transparency, high fees.

Art and Collectibles

High-value Items. Millionaires and billionaires often collect art, vintage cars, or other valuables. Auction houses like Christie’s or Sotheby’s are key players in this space.

• Pros: Asset appreciation and personal enjoyment.
• Cons: Illiquid, valuation challenges.

Offshore Accounts

Tax Benefits. Some ultra-rich individuals open accounts in countries with favorable tax laws, using banks like UBS or Credit Suisse.

• Pros: Tax benefits, privacy.
• Cons: Regulatory scrutiny and potential legal issues.

Trusts and Foundations

Asset Protection. Trusts can be set up to manage wealth distribution, protect assets from creditors, and provide tax benefits. Many wealthy individuals work with law firms specializing in trusts and estate planning.

• Pros: Asset protection and tax advantages.
• Cons: Setup complexity, ongoing management.

Cryptocurrencies

Digital Assets. With the rise of digital currencies like Bitcoin and Ethereum, many wealthy individuals have diversified into this new asset class.

• Pros: High potential returns, decentralization.
• Cons: High volatility and security concerns.

Diversifying assets and using a combination of the methods above not only grows wealth but also ensures that risks are spread out, providing a level of protection against adverse market conditions.

Investment Strategies to Grow Savings

Investing isn’t just about saving; it’s about growing your money to meet future financial goals. By understanding the basics of investment, anyone can put their money to work in ways that have the potential for growth.

For those looking to bolster their savings quickly, consider saving $10,000 in 6 months, or maybe in a year if 6 months seems undoable. Not only does this give you a good and considerable $10k amount to begin investing with, but it also offers peace of mind, knowing you have a significant emergency fund or financial cushion.

Below are some of the best strategies to help grow your savings:

Dollar-Cost Averaging

What is it? Regularly investing a fixed dollar amount, regardless of market conditions.

• Example: Monthly contributions to a 401(k) or an investment account.
• Pros: Reduces the risk of “timing the market” and smooths out purchasing prices over time.
• Cons: Might not capitalize on market lows as effectively as a lump-sum investment.

Diversification

What is it? Spreading investments across various asset classes to reduce risk.

• Example: Investing in stocks, bonds, real estate, and commodities.
• Pros: Reduces potential losses from a single poor-performing investment.
• Cons: Might limit potential returns.

Value Investing

What is it? Investing in stocks that appear to be trading for less than their intrinsic or book value.

• Example: Following strategies by investors like Warren Buffett.
• Pros: Potential for high returns, a rational approach based on fundamentals.
• Cons: Requires in-depth analysis, undervalued stocks might not realize their true value.

Growth Investing

What is it? Focusing on stocks that show signs of above-average growth, even if the share price seems expensive in terms of metrics like P/E ratio.

• Example: Investing in tech startups or emerging industries.
• Pros: High return potential, with some startups having a calculated value much higher than traditional businesses, on exit.
• Cons: Higher risk, especially if growth doesn’t continue.

Dividend Investing

What is it? Investing in companies that return value to shareholders through dividends.

• Example: Choosing stocks with a consistent history of dividend payouts.
• Pros: Steady income stream, potential for compounding if dividends are reinvested.
• Cons: Might not offer as high growth as non-dividend stocks.

Bonds and Fixed Income

What is it? Investing in bonds, which are essentially loans that you give to companies or governments in exchange for periodic interest payments plus the return of the bond’s face value when it matures.

• Example: U.S. Treasury bonds, corporate bonds.
• Pros: Steady income stream, relatively lower risk than stocks.
• Cons: Lower return potential, interest rate risks.

Real Estate

What is it? Purchasing physical properties or real estate investment trusts (REITs).

• Example: Buying rental properties or investing in commercial real estate.
• Pros: Rental income, property appreciation.
• Cons: Requires significant capital, management intensive.

Mutual Funds and ETFs

What is it? Funds that pool the money of many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

• Example: Vanguard’s S&P 500 ETF (VOO; I already recommended this in another section), Fidelity’s Total Market Index Fund.
• Pros: Diversification, professional management.
• Cons: Management fees, potential for overlap in holdings.

Remember, the best strategy often involves a combination of the methods above, tailored to one’s financial goals, risk tolerance, and investment horizon.

Keeping Large Amounts of Cash: How Much is Too Much?

We’ve all heard tales of individuals keeping vast sums of money under their mattresses or locked away in home safes. But one has to wonder, is it genuinely wise to maintain a significant amount of cash readily accessible? And, if that’s the case, what’s the threshold for “too much”?

First is the danger of theft. A home filled with cash can be an inviting target for burglars. But theft isn’t the only concern; there’s also the risk of loss. Events like house fires or natural disasters can swiftly decimate your savings. And then there’s the silent culprit: inflation. Without earning interest on stored cash, its value gets gradually eroded, diminishing its purchasing power over time.

On the flip side, there are tangible benefits to having some cash within arm’s reach. The most evident is its utility in emergencies. Power outages, unforeseen natural disasters, or sudden banking crises can render electronic transactions impossible, making cash indispensable. Additionally, certain deals or transactions still operate on a cash basis. Furthermore, in some situations, cash can be a potent tool in negotiations, offering immediacy that digital methods can’t.

How much should you keep?

For the average individual, maintaining a small emergency fund on hand is often recommended. This can vary based on personal circumstances, but a range between $500 to $2,000 is a general guideline. However, businesses, given their day-to-day operational needs, may necessitate a more substantial cash float.

Once you’ve settled on an amount, decide on the safest places to store this cash. Home safes, especially those that are fireproof, can be a viable option. Yet, one should bear in mind that most home insurance policies set claim limits for cash. Another avenue to consider is a safe deposit box offered by banks and credit unions. These are secure compartments within a bank’s vault. Though they provide heightened security and protection from calamities, they aren’t always as accessible as one might desire, and there are costs tied to their rental. If you’re cautious, diversifying your cash storage—spreading it across various locations—can mitigate risks.

Financial Planning with Rules: 50-30-20 and 30-20-10

Financial planning can often feel overwhelming. However, some simple rules can help guide your spending, saving, and investing decisions. The 50-30-20 and 30-20-10 rules are popular frameworks that provide clarity on how to allocate your income.

The 50-30-20 Rule

The 50-30-20 rule is a simple budgeting guideline popularized by Elizabeth Warren and her daughter Amelia Warren Tyagi in their book All Your Worth: The Ultimate Lifetime Money Plan. The rule is designed to help individuals allocate their after-tax income in a balanced and sustainable way. Here’s a breakdown of the rule:

1. 50% for Needs: Allocate 50% of your after-tax income to necessities. This includes essential living expenses such as:
   • Rent or mortgage payments
   • Utilities (water, electricity, gas, etc.)
   • Groceries
   • Health insurance
   • Car payments and transportation costs
   • Any other debts or obligations that you must pay
2. 30% for Wants: Use 30% of your after-tax income on discretionary or non-essential expenses. These are expenses that enhance your lifestyle but aren’t critical for survival. They include:
   • Dining out
   • Entertainment (movies, concerts, etc.)
   • Shopping (clothing, gadgets, etc.)
   • Vacations and travel
   • Hobbies and leisure activities
3. 20% for Savings and Debt Repayment: The remaining 20% of your after-tax income should be directed towards savings, investments, and debt repayments. This encompasses:
   • Emergency funds
   • Retirement savings (like 401(k) or IRA contributions)
   • Other investments
   • Paying off high-interest debt (like credit card debt)
   • Additional payments towards loans to reduce principal amounts faster

👍 Pros: Simplifies budgeting; Provides a balanced approach.

👎 Cons: Might not be suitable for high-income earners who can save more or those with extensive debt.

The 30-20-10 Rule

Allocate 30% of your income to living expenses, 20% to entertainment and discretionary spending, and 10% to savings.

• Savings (40%) – Where 40% of your income goes towards your savings, building an emergency fund, retirement savings, and other financial goals.
• Living Expenses (30%) – Rent, mortgage, utilities, and other necessary bills.
• Entertainment & Discretionary (20%) – Fun activities, hobbies, and non-essentials.
• Savings (10%) – Should go towards charitable giving or other financial goals.

👍 Pros: Offers more discretionary spending, good for younger individuals or those without large financial obligations.

👎 Cons: Less emphasis on saving, may not be ideal for long-term financial planning.

How to Implement These Rules

Use budgeting apps or traditional methods to track your expenses. Understand where your money goes. No rule is one-size-fits-all. Modify percentages based on your current financial situation and future goals. As your income, expenses, and life circumstances change, revisit your budget and adjust accordingly.

In essence, both rules offer guidelines for individuals to manage their finances. While they provide a solid foundation, it’s essential to tailor them to fit individual needs and situations.

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