I have plenty of friends and family members who distrust the banking institution and everything it stands for. An honestly, for the most part I don’t blame them. It’s a pretty terrible industry.
There are a couple of places you could keep your money if you don’t trust banks such as in real estate investment trusts, peer-to-peer lending accounts, cryptocurrency, or US-backed securities.
However, all of these are investments and come with some kind of risk. An while the banking industry may have a bad rap it’s still the safest place for your money.
That said, I can understand the benefits of diversifying where you store your money. So, I decided to explore the different places you could opt to store your money instead of (or in addition to) the bank.
Keep It In Cash
During the depression era, it was common for people to keep cash in their homes instead of putting it in the bank. While this may seem like one of the most obvious places to keep your money if you don’t trust banks it’s incredibly risky.
If stolen or damaged (in for example a fire) then you will be unable to claim for the money under your insurance.
However, this isn’t the most common way money is lost when it’s stored this way. Instead, it’s by forgetting where exactly you put it for safekeeping (we’ve all done that with something right?).
Keeping a small amount of cash on hand can be convenient and prevent you from having to go to the bank or ATM to pay small bills. However, you’ll earn zero interest from your cash if it’s sat in the sock draw.
Cryptocurrency
Cryptocurrency has proven itself as a popular investment for those who don’t trust the banks. After all, it’s known to be censorship-resistant money.
One advantage of cryptocurrency over some of the other investments covered in this article is that there are some stores (albeit a small number) that accept certain types of this currency as payment.
However, there are a vast number of drawbacks to storing your money in cryptocurrency. Obviously, it’s not backed by any banks or the governments, additionally, individual cryptocurrency coins are classed as being a zero value commodity.
Much like any investment, it is a risk and often an incredibly volatile market (in fact recently the valuation of Bitcoin the most popular cryptocurrency dropped 50% in one day)
Real Estate Investment Trusts
Real Estate Investment Trusts require you to invest in property development. This can be in the form of commercial buildings, office premises, and apartment complexes. You along with a number of other investors will lend the money to the company so they can build the complex.
Then the money will be returned to you with interest once the units within the complex have been sold.
The majority of these investments are long term of around three to five years and come with a number of risks including a possible downturn in the market and the inability to sell the units.
This makes accessing your money prior to the end of the ‘campaign’ near impossible and very difficult (on a basic level you’d have to look for someone to take over the loan, and will often pay a fee or penalty as a result of withdrawal)
US Treasury Securities
You could consider putting your money in US Treasury Securities instead of the bank as they do provide you with the opportunity to earn interest (the value of which is subject to the performance of the economy during this time).
The US treasury security is financed by the US government hence providing full principal and interest rates. This trusted money storage platform operates in different terms depending on your choice. However, understanding the different types of securities, purchasing them and holding them can be difficult.
Much like all investments, it’s something that should be discussed with a certified financial advisor.
Peer-To-Peer Lending
Peer-to-Peer lending is an excellent alternative for those who do not want to put their money in the bank bank as it provides you the opportunity to earn interest.
Banks make profits from lending cash to individuals and charging a percentage for doing so. A percentage of this is then returned to you in the form of interest.
Peer to Peer lending aims to somewhat remove the middle man and provide those fronting the money with a higher return on investment. However, this leads to an increased amount of risk.
Some peer to peer lending companies require you to invest the money for a fixed term, however some companies allow you to access your money at any time but offer a lower interest rate as a result.
Much like all investments this is one that should be made as part of a diversified portfolio and discussed at length with a certified financial advisor (I am not a certified financial advisor and hold no responsibility for any actions taken as a result of this or any of the other articles on this website)
Certificate of Deposit
Certificates of Deposit often referred to as CD’s can be purchased from a bank from as little as $1,000.
Unlike some of the other investments we’ve covered in this list they are backed by the FDIC (for up to $250,000 per person, per bank. You can split across multiple banks to protect yourself with the FDIC for investments higher than $250,000)
Each CD has a pre-set term. These tend to range from 1 month to 5 years. Your money is locked in for this period of time and can only be accessed by paying a fee (unlike a savings account or checking account where you can withdraw your money at no charge).
The higher interest rates are often linked to the value of the certificate (how much you invest) and the term of the certificate (how long you invest for).
Again this is more of a long term solution. I’m yet to see short term CDs (of less than 2 years) available so you’ll want to look to make this investment as part of a portfolio of investments and should speak to your certified financial advisor (I am not a certified financial advisor) before doing so.