As we’ve already discussed, everyone should have cash on hand. Having substantial cash reserves allows you greater amounts of security in case “something goes wrong.” Having substantial cash reserves also allows you greater amounts of freedom and mobility in case a buying opportunity opens up somewhere in the market.
Like I’ve written about before, I like to keep roughly 10% of my assets in cash – liquid form for security and freedom. If you go a similar route then, once a considerably sized portfolio has been built, you’re going to have a lot of cash to manage.
The only issue, then, is a question of storage. Should you keep your cash under your bed? Should you put it all in a bank account? Should you put your money in a CD? The answer is, of course: it depends. Let’s spend a few moments and go over the options for storing your money.
Where to Store Your Money
Personal Safe. Here’s an old fashioned idea: keep the money yourself by storing your cash in a safe. If you go this route, don’t store too much on hand – you don’t want to become a target of criminals. The goal is security, not turning you into a target.
Safety-Deposit Box. You can store your cash in safety-deposit boxes at banks. You can either get a local safety-deposit box, or you can even get large ones out of the country in Panama, Switzerland, or some other country. Getting a foreign safety-deposit box is, of course, only if you think bad things are going to happen and you’re getting ready to do some hardcore traveling Jason-Bourne style. Or something like that.
Savings Account. Storing cash in a savings account is a great way to have fairly easy access to your cash while also earning a little bit of interest. Don’t expect too much interest though – or you’ll be sorely disappointed. Chances are your cash will be FDIC insured.
Checking Account. Same as the savings account, only it’s easier to get to your money and harder to get interest on your cash. You’ll probably not beat out inflation with interests rates as low as almost all checking accounts. Most checking accounts don’t even offer interest at all. Still, your cash will probably still be FDIC insured.
Swiss Bank Account. Honestly, a Swiss bank account is fairly similar to other bank accounts. The biggest difference is you get more privacy with a Swiss bank account. Plus, Switzerland has acted as a financial safe haven for centuries. If something goes wrong politically in your country, keeping some cash in Switzerland could be a great bit of insurance.
Certificate of Deposit. A certificate of deposit (or “CD for short) is like a souped up savings account. It typically allows you to earn more than a typical savings or checking bank account, but also usually penalizes you if you take money out before a certain time. For example, if you get a 6-month CD, then removing your money out of the CD at 5 months will cause you to lose some of the interest and/or money. If you know how long you won’t need to access your money, then a CD might be a great option.
In the end, you should have access to considerable amounts of cash. It provides security, freedom, and opportunity during down markets. In the future, I’ll also be writing about similar ways of storing wealth, such as through bonds, money market accounts, and the stock market. Stay tuned.
Wealth Management 101
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