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What's the best way to save/store money?
Lately I've been thinking about withdrawing most if not all my money off the bank and investing in a safe box, but I'm not sure how wise of a decision that is. How does everyone here go about that? Do you keep your money in the bank? Do you have a safe box at home? Why one over the other? Do you invest some of it, say in things like cryptocurrencies/stocks? What would you recommend or advice someone to do in regards to this if you could?
Definitely need some more information here. What country is this? Approximately how much money are we talking? What purpose does this money fill in your budget (daily use cash/checking, emergency savings, long term saving for car/house/wedding/etc, short term investment, long term investment, etc)? Why are you thinking of taking money and putting it into a safe?
I'm going to assume the US and that we're talking about either emergency savings or long term savings, and not an absurd amount of money. I also don't know how much you know, so forgive me if some of this is obvious/basic. The answer would be to keep using FDIC-insured banks (or credit unions). For those banks with FDIC insurance, the government will guarantee $250k "per depositor, per insured bank, for each account ownership category". Ignoring the different categories (you can find them on the fdic.gov website) - that means you can safely keep $250k in a checking/savings account. Since this is per bank, you can protect more than $250k by having accounts at different banks. That protection will be in place unless the government as we know it is destroyed - in which case saving cash at home isn't going to be all that helpful and you would invest in more useful physical goods.
I wouldn't keep much in physical cash in the US. A small emergency fund in a safe is fine, but theres no recourse if that cash gets lost, stolen, or destroyed. Also if the police decide to raid your house, they can simply take that cash even if you aren't charged with a crime.
You mention crypto currencies and stocks, which would generally be less of emergency/long term savings, and more on the investment side. Crypto is hard to give advice on...its basically speculative gambling at the current point. Crypto is down right now due to several other reasons like fraud and scandals - and its hard to tell what will happen to it. It could recover and go off to the moon again - but at this point it seems like crypto has "failed" as a new currency and that puts its value into question. Given the volatile nature, I would suggest against putting too much into crypto. Putting some in is fine - just be prepared to either lose that money or see it stagnate.
Stocks (and bonds) are going to be the more traditional long term investment options. Bonds are typically more stable, but won't grow very much. Stocks are more volatile, but also can see much bigger gains (and losses) than bonds. Stocks can be scary to watch day-to-day or even month-to-month, but over decades, things mostly tend to trend upwards. Usually a mix of stocks and bonds is recommended based on when you expect to need that money. A 22 year old in their first job will likely lean towards all stocks when saving for retirement - as they have 40+ years for that money to grow, and any crashes won't be much of a concern. As you get closer to retirement, its common to put more into bonds to protect against crashes or downswings. If you are retiring in 2 years, you'll want to have more stable bonds in case a recession happens - as the bonds will continue to grow small amounts where the stocks will fall. Your 2 year window doesn't leave much time for those stocks to bounce back.
Edit: Note that we're typically talking about "funds" of stocks/bonds - not stocks in individual companies. Investing in individual companies is much riskier since any company's stock could drop - or the company could go under. A fund made up of many different stocks/bonds is going to be much more stable. Even if 1 of those 100 companies goes under, the 99 others will make up for it. Funds are managed by someone though, so theres usually a percentage fee for managing the fund - and a high fee could negate any earnings. So I'd suggest sticking with either index funds or target date funds. Index funds usually encompass a certain set of the stock market. A common option would be a fund that has all the stocks in the S&P500 - but you could have a tech company fund, international fund, bond funds, or a "green" fund that avoids things like oil companies. The best part of these funds is that they don't need much management at all, which means they are very low fee...and sometimes even zero fees. I typically stick with index funds, and rebalance annually to shift some towards bonds the closer I get to retirement. The "target date" funds are a similar, but a little more hands-off. You pick a target date fund that is close to your expected retirement date - say a Target Date 2060 fund. As it gets closer to 2060, there will be more in bonds for a more stable investment. These target date funds will have a higher management fee than index funds and doing your own balancing - but the good ones still have pretty low fees and it saves you some work over the years.
Long term savings can also bleed over into shorter-term investments. If you plan on savings $80k to put a down payment on a house 4 years from now - it might be wise to invest that money for now. Money sitting in a checking account typically loses value, as the interest rate is usually less than inflation. Savings accounts can be better - especially with "high yield" options...but you're still at-best, keeping up with inflation. Investing into something with a bit more growth - while also being relatively stable - is a strong option. Bond funds or CDs or something similar.
The personal finance subreddit has a very useful graphic with what to do with incoming money. You can definitely find some controversial or hivemind opinions in the sub, but they do a decent job with the basics.
So for example - my setup is...
I stumbled across this infographic some time ago, and I think it helps to paint a picture of where wealth typically is, and what people are doing with it.
Most people asking this question are really asking how to invest money for retirement, and the adage for a long time has been to invest in low cost index funds. This hasn't changed. It's an extremely simple strategy but the numbers show it has pretty much the best average payoff. Vanguard, the inventor of index funds, has this short paper helping to explain why this is a sound investment choice. In case you're curious what the academics think about this, you may find this page useful as well.
This is a really excellent post! The common thread that money management boils down to is almost always risk management, but even just knowing what risks exist requires a deeper working knowledge of the financial system than I think most people would expect. Things like FDIC insurance, civil asset forfeiture for cash, and the ongoing impact of compound inflation all change the balance of even a "simple" question quite dramatically.
Pretty much the only clarification I'd add here is around the point on stocks: when we say they tend to trend upwards in the long term, that's the market as a whole, not stock in an individual company. If you invest directly in ACME Industries and they go bankrupt, or even just limp along at half their value after making some terrible business decision, then your money's gone and that's the end of it - companies have peaks and troughs, some recover, but in the long run a lot of companies also just outright fail.
If you invest in an index fund (a bundle of stocks held by a financial institution, so you can buy a representative slice of that bundle without having to buy and manage several hundred individual stocks in different percentages for yourself) and that fund had ACME Industries as part of its portfolio then the portion invested in them is still gone, but that was only a small fragment of your investment and over the course of years and decades the growth of the rest of the companies in the bundle is likely, on average, to offset those losses.
Good points! I didn't get too much into investing stuff, but I'd basically always recommend either a low-fee index fund (VTSAX!) or a "target date" fund, which has a higher fee, but slowly swaps the balance towards bonds as it gets closer to the "target" retirement date. You can mirror that functionality yourself for lower fees with index funds and an annual rebalance - but the target date funds are great for those who don't want to manage it themselves.
The big issue with safe deposit boxes: they are unregulated, see this previous Tildes post.
A safe can be good, especially for non-cash valuables, but a true safe (i.e., one equivalent to what a jeweler or pawn shop would use) is expensive, see here.
I keep mine in the bank. The $250,000 FDIC limit is more than enough for me, and if they don’t pay out on that, then we’ve got bigger problems.
If you want your money to grow and not stagnate, invest some of your money into an index fund, maybe some Treasury bonds.
This is the most accurate advice. Especially if this is a reaction to the banking crisis, for an average person, keeping your money where it is is the most-prudent. If you're exceptionally worried, make sure to have a backup account on a different bank if your funds get locked for a day or two while FDIC kicks in.
Cryptocurrencies are probably the least safe place to keep your money. They are a speculative asset, but with almost none of the regulation that comes with investing in other speculative assets. Cash is safe but hardly ideal as inflation slowly eats away at its value.
If you're in the US, any bank account you keep money in is insured by the FDIC up to $250,000, I imagine other developed countries have similar safety nets in place. Banks also pay interest on your balance, even if it is only a tiny amount. I can't really imagine a scenario where moving money from a checking or savings account to a safe deposit box is a wise move, I don't think these are typically meant for just holding on to cash.
Unless you're in a highly unstable country, both politically and economically (like, in the brink of dictatorship or actual civil war), taking all your money from your savings account and storing physical currency in a safe is highly inadvisable.
It’s not what you asked, but if you’re wondering what to do in response to recent US bank runs:
If you only have one bank account, one thing you can do is open a bank account with a second bank as a backup. If something goes wrong at your bank, there might be some temporary disruption in service before you get your money back, even if it is fully insured.
Another interesting option might be to open a brokerage account and buy CD’s through them. Interest rates are high enough now that buying CD’s is attractive and a brokerage lets you buy them from many different banks. (Before, interest rates were near zero and it wasn’t worth it.)
Another safe, conservative investment, if you’re worried about inflation, is buying TIPS (inflation-protected bonds) from treasurydirect.gov. The UI is pretty terrible though, and it means remembering account information for a rather special-purpose account.