Have you ever wondered where do millionaires keep all their money? High net worth people do not keep their money in the bank. One peculiar thing about rich people is that they know how to make money work for them. As such, they do not leave all their money lying in the bank just to earn small interest rates. Instead, they keep their money in investments and assets that earn them returns.
Where Do Rich People Keep their Money?
This is where millionaires keep their money.
1. Cash and Cash Equivalents
Rich people are very frugal and are usually very keen on where they keep their money. Rich people spend on necessities and some luxuries. The other money, they keep in highly liquid cash equivalents so that they can easily access it in case they need it. Rich people keep a part of their cash in a bank where they have a private banker. The banker helps them to manage their cash and wealth. They do not have to queue when they visit the bank.
Rich people keep an average of 25% of their money in cash. This helps them easily access funds in case of downturns. Other places rich people keep their money are in cash equivalents like money market funds, treasury bills, commercial papers, and certificates of deposits. Besides, most rich people also have an emergency account.
2. Real Estate
The other place where millionaires keep their money is in real estate. Real estate is an excellent investment idea with a high return on investment. Millionaires have large real estate portfolios in land, rental houses, and luxurious homes. Real estate properties appreciate very fast and are a good source of passive income through rental income.
The real estate market is more stable compared to other investments. Although real estate requires large startup capital, millionaires have the money to invest in it. Some of the real estate investments for the rich include commercial properties, rental properties, raw land, luxurious homes, and REITS.
3. Stocks and Stock Funds
Many rich people keep their money in securities like stocks and shares and invest in index funds. Investing in shares and stocks is simply buying a unit of ownership of a company. Many rich people have an interest in multiple companies where they earn dividends. Equity securities are good sources of passive income.
Rich people also keep their money in index funds that earn high returns without having to manage them. Besides, they have low management fees and they are a good way to diversify investment.
Commodities like gold, silver, and other precious metals are used by rich people to store their wealth. However, they are an excellent way to hedge against inflation. However, they come with some complexities that many rich people not want to deal with them. For instance, they need a secure place to store them. Besides, precious metals do not offer high returns on investment.
5. Private Equity and Hedge Funds
Another place where rich people keep their money is in hedge funds. Hedge funds are mostly used by rich people and are traded on the stock exchange. They are highly liquid. To invest in private equity funds, you must be an accredited investor.
Digital assets like bitcoin, Ethereum, and Tether have become popular ways for rich people to store their money. Although the crypto market is not regulated by banks or the government, it is increasingly being adopted by investors. Cryptocurrencies use blockchain technology to secure transactions. Elon Musk, the world’s richest man is one of the rich people keeping money in cryptocurrencies.
The other place where rich people keep money is in their businesses. Most millionaires and billionaires like Mark Zuckerberg, Elon Musk, and Jeff Bezos have businesses where they keep their money. It takes time to establish a successful business.
Before rich people can invest in other businesses, they first assess whether it is worth investing in them. Most rich people invest in technology-based businesses since they have high returns.
8. Alternative Investments
Some rich people keep their money in alternative investments like vintage items, NFTs, intellectual rights, wine, antiques, and intellectual rights. Some things like wine improve in quality over time and hence their value also goes high. For instance, if you have composed songs, you can hold intellectual property rights and make money from them.
Do Millionaires Keep their Money in the Bank?
No. Many rich people do not keep most of their money in the bank. Then, where do millionaires bank? Millionaires keep their money in investments that earn returns over time. Some of these investments include real estate, stocks and funds, cryptocurrencies, and commodities.
Also read: Things millionaires do not spend money on.
How Much Do Billionaires Keep in Cash?
Billionaires keep about 25% of their money in cash and cash equivalents. This helps them easily access the money during downturns. The advantage of having liquid cash is that it helps you in instances when you need cash urgently.
Summary of where Billionaires Keep Their Money
The above are some of the places where rich people keep their money. Rich people do not leave their money in the bank just to earn meager interest. Instead, they keep their money in income-generating investments like real estate, stocks and shares, and commodities. This way, they are able to take advantage of compounding interest.