Where Do You Save Your Money?

[Lieren Schuette]

Hello everyone!  
I am a new investor in the process of building my real estate savings, and I'd love to hear where everyone is keeping their own money while waiting to invest it into real estate.  I want something with a high yield so I can earn as much as possible on my money.  I know it's difficult to keep up with inflation right now, but my regular savings account just isn't doing enough for my money.

Thanks in advance!

[Joe Splitrock]

Originally posted by @Account Closed:

Originally posted by @Joe Villeneuve:

Originally posted by @Account Closed:

Originally posted by @Lieren Schuette:

Hello everyone!  
I am a new investor in the process of building my real estate savings, and I'd love to hear where everyone is keeping their own money while waiting to invest it into real estate.  I want something with a high yield so I can earn as much as possible on my money.  I know it's difficult to keep up with inflation right now, but my regular savings account just isn't doing enough for my money.

Thanks in advance!

If I was just starting out I would never put my money in a bank, especially with inflation whipping up. There are other reasons a bank is a bad place for your money. It's called " fractional reserve banking" and "bail ins" but I won't go into detail on those here.

For practical options, you could buy something of value that will go up as inflation goes up. Physical Silver - it's at $22 an ounce (don't buy paper silver - not ETFs), yes to collectibles, yes to things that can be bought wholesale, can be preserved, are "dense" in value and don't take up much space. These might include baseball cards, autographed art work etc. 

I know it sounds odd, but that type of thing is the only hedge against inflation when you can't afford to buy land, houses, gold. 

What Is Fractional Reserve Banking?

Fractional reserve banking is a system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal. This is done to theoretically expand the economy by freeing capital for lending. But it means they don't have enough "cash on hand" for the depositors. Most banks have less than 10% on hand so 90% is not available to return to depositors

What Is a Bail-In?

A bail-in provides relief to a financial institution on the brink of failure by requiring the cancellation of debts owed to creditors and depositors. Bailouts help to prevent creditors from taking on losses while bail-ins mandate creditors & depositors take the losses.

The problem arises when there is a problem in the economy and you want or need your cash and the banks "close the window". That occurs as in the “bank runs” of previous recessions and depressions. Everyone wants their money Now! And you are stopped from getting your money. Yes, the FDIC insures up to $200,000 of your deposits but they don't guarantee to give you that money when you need it most. It is in their timing that they dole out what is rightfully yours.

The banking problem of 2008 was that the velocity of money stopped. No one had money to lend on the overnight exchange. If a bank like Chase can’t get money, you are surely not going to get your money. That’s when you want and need it most. That is when a fire sale on commodities is on since everyone is selling to get a hold of cash. You want availability of cash so you can buy things up cheaply.

Also, Banks have recently been granted the right to take and use your money in order to stay solvent. And you have no say in the matter.

I don't follow. You are saying, rather than putting cash in the bank, I should buy physical silver, baseball cards and artwork. How would that be more solvent than putting money in an FDIC insured bank account? If there is a run on the banks, I have trouble believing the baseball card and art collectable market will be much of a sellers market.

I had no trouble accessing my cash in my banks during the 2008 financial crisis. I guess it depends on what bank you are doing business with. I actually sold off some baseball cards a few years ago and the collectable market was brutal. I realize it has now recovered, but we are in an asset bubble right now. A friend recently sold a Mickey Mantle baseball card for over $50K at auction. It was mint and graded. He paid a few hundred for it back in the 1980's. Nice investment, however if the grading had come back one level lower, he said he would have gotten a couple thousand for it. I personally think the collectable market is way too risky. I do own silver, but not a significant portion of my wealth.