The website for the Federal Deposit Insurance Corporation states that "no depositor has ever lost a penny of insured deposits since the FDIC was created in 1933." FDIC insurance covers $250,000 per account and applies to both the initial principal and any interest earned.
Still, mistrust toward banks and financial institutions in general has caused a number of more fearful individuals to seek alternative venues to park their capital.Others with long memories may simply be avoiding the banks on principle, given the banks' roles in contributing to the reckless lending that led up to the bursting of the housing bubble and the Great Recession. If you fall into either of these categories, below are seven places to keep your money if you no longer trust (or approve of) banks.
1. Uncle Sam's Place
It's good to learn about the U.S.Treasury and the Federal Reserve, especially since they would be more than happy to take your funds and issue you a security in return. A U.S.government bond still qualifies in most textbooks as a risk-free security, or as close as one can get to holding an asset that has minimal chance of not being returned on maturity. The only problem is that many individuals and institutions already have had this idea and have bid interest rates to low low levels. In early January 2019, a 10-Year Treasury Note's yield was around 2.730%, near the lowest ever.
2. Real Estate
If you don't love the idea of holding your money in the bank, but still want to see your savings appreciate in value, you'll want to invest it in something. Real estate could be a good option. Become a landlord. Put down some of your principal on a property, fix it up a bit, rent it out and have your tenants pay off the mortgage. Or, if you're interested in a shorter term opportunity and have more experience, maybe try flipping houses. It can be a risky and sometimes fickle market. But it's not a bank. Done right it can have a huge upside. It is, of course, also a lot more time consuming.
3. Precious Metals
Under a doomsday scenario in which financial markets cease to function, physical gold, silver and other metals such as platinum or copper could likely continue to hold some value. The likelihood of having to return to a barter system with physical goods is minimal, but it may make sense to hold a certain percentage of your assets in this form. For peace of mind, there is also the potential for them to appreciate in value.
4. Other Tangible Assets
Metals have been used in coins historically as a way to literally prove the worth of a a currency. Other tangible assets may have less stable value, but are also objects that can be touched and seen, compared to a bank account statement that could be hard to collect on if the financial institution that housed it ceases to exist. These hard assets include fine art, cars, watches and other jewelry, diamonds and other jewels, and just about anything that qualifies as a collectible.
5. Under Your Mattress
Although hiding cash under your mattress has become a cliché, it is still one way to keep your money close, though not necessarily secure. You can also hide your assets in a safe deposit box (or just a safe). Needless to say, it's key to keep a mental or physical record of where they are located. Again, this method qualifies for a doomsday scenario and should likely not be relied on for large amounts. But some may find the peace of mind helpful, especially in times of a short-term liquidity crunch.
6. In a Business
This category is also general, but buying a business can ensure a return on your investment, provided the business generates a profit. So can buying a farm – a particularly tangible business, if not a reliably profitable one. However, owning farmland is a good fit with a survivalist mindset; land can produce food on the off chance of a global calamity or meltdown of the global financial system.
Cryptocurrencies are another alternative investment option. There are a number of choices by now; Bitcoin is just the best known. A volatile market, cryptocurrencies offer individual investors a unique opportunity to get in on the ground floor of an emerging technology, without keeping your money in the bank. That's not that common. Of course, it's a high-risk, high-reward opportunity. Don't play in the crypto pond with funds you'll rely on for your future. But hit it big, and the future could be lusher. Investors circling, trying to figure out where this market is headed.
The Bottom Line
Although the subprime mortgage meltdown is a decade old, the financial industry is still looked upon with some suspicion these days (not helped by the stream of Wells Fargo revelations). And as we move further away from paper record-keeping, there is also always the risk that technology fails and bank account information becomes unverifiable. For the especially wary, the above alternatives to a traditional bank may make sense for at least a percentage of net worth.