How to Keep Money Safe: Best Alternatives to Savings Accounts

With interest rates on traditional savings accounts often lagging behind inflation, individuals are exploring alternative methods to preserve and grow their wealth. In a world of economic uncertainties and fluctuating financial markets, diversifying beyond conventional savings accounts can provide both security and growth potential.

Insured Accounts

Insured accounts, offered by banks and credit unions, are protected by government-backed programs like the Federal Deposit Insurance Corporation (FDIC) in the United States or the Financial Services Compensation Scheme (FSCS) in the United Kingdom. These systems guarantee depositors can recover funds up to a specific limit—currently $250,000 per depositor, per insured bank, per ownership category in the U.S.—even if a financial institution fails.

The primary advantage of insured accounts is their safety and liquidity. Unlike some investment options, funds in these accounts are readily accessible for emergencies or unforeseen expenses. They often come with minimal fees and straightforward terms, making them an appealing choice for individuals seeking simplicity in managing their finances.

Although the interest rates on insured accounts may not always match inflation, they provide unmatched peace of mind for those prioritizing capital preservation over high returns. When combined with other financial instruments, insured accounts can form the foundation of a balanced wealth management strategy.

Certificates of Deposit

Certificates of Deposit (CDs) offer a structured savings option for those willing to lock in funds for a set term. In exchange for this commitment, banks typically provide higher interest rates compared to standard savings accounts. The fixed interest rate on CDs ensures predictable returns, making them advantageous during periods of market volatility or economic uncertainty.

CDs come in various types, such as traditional, jumbo, and bump-up CDs. Jumbo CDs, which require higher minimum deposits, may offer slightly better rates, while bump-up CDs provide the flexibility to increase rates once during the term. These variations allow individuals to align CD investments with their financial goals and risk tolerance.

Money Market Funds

Money market funds balance liquidity with modest returns by investing in short-term, high-quality debt instruments like Treasury bills, commercial paper, and certificates of deposit. These funds typically offer higher yields than traditional savings accounts while maintaining relative stability, appealing to risk-averse investors.

Unlike CDs, money market funds allow investors to access their funds at any time, making them a flexible option for short-term cash management. However, they are not without risks. Although designed to maintain a stable net asset value (NAV), some funds have “broken the buck” in rare cases, as seen during the 2008 financial crisis. Recent regulatory reforms aim to enhance transparency and resilience, offering additional safeguards for investors.

Government-Backed Securities

Government-backed securities combine safety with income potential. Issued by national governments, these instruments are considered low-risk due to the backing of the issuing country. U.S. Treasury securities, such as Treasury bills, notes, and bonds, are among the most well-known options, varying in maturity from less than a year to more than ten years.

During economic uncertainty, these securities are often seen as a benchmark for risk-free rates, influencing broader financial markets. For example, the yield on a 10-year Treasury note serves as a reference point for various interest rates, providing stability and predictability to investment portfolios.

Physical Storage Options

For individuals seeking tangible control over their wealth, physical storage options offer a secure way to protect money or valuables outside traditional financial institutions. While these methods do not generate returns, they ensure immediate access and peace of mind.

Home Safes

Home safes are a convenient option for storing cash, documents, or valuables. Modern safes often feature advanced security measures such as biometric locks, fireproofing, and water resistance. However, their effectiveness depends on quality and installation. Poorly secured safes are vulnerable to theft, and significant amounts of cash stored at home are typically uninsured unless covered by a specific homeowner’s insurance rider.

Safe Deposit Boxes

Safe deposit boxes, available at banks and credit unions, provide off-site security for valuables. These boxes benefit from the robust infrastructure of financial institutions, including controlled access and surveillance systems. However, their contents are not insured by the bank or federal programs like the FDIC, requiring individuals to purchase separate insurance for protection. Accessibility is also limited to the institution’s operating hours, and rental fees vary depending on box size and location.

Private Vault Facilities

Private vault facilities offer higher security and flexibility compared to bank safe deposit boxes. These facilities often provide 24/7 access, advanced biometric systems, and customizable insurance options. They are particularly appealing for storing substantial assets like gold bullion or rare collectibles. However, private vaults are more expensive, and their reliability should be carefully vetted before use.

Diversifying Across Separate Institutions

Spreading funds across multiple financial institutions reduces risk and maximizes insurance coverage. For instance, depositing $250,000 into two FDIC-insured banks ensures full coverage for $500,000 in savings. This strategy also mitigates exposure to institution-specific risks, such as operational failures or cybersecurity breaches.

Diversification provides access to a broader range of financial products and services, such as higher-yield accounts or promotional offers. However, managing multiple accounts requires organization to prevent missed payments or fees.

Insurance Coverage for Funds

Insurance coverage can extend beyond traditional deposit insurance, offering additional protection for substantial savings or non-traditional assets. High-net-worth individuals may consider private deposit insurance policies to supplement FDIC coverage, safeguarding amounts above the $250,000 limit.

For assets stored in home safes or safe deposit boxes, specialized insurance riders can protect against theft, fire, or other risks. Evaluating the cost and terms of such policies is essential to ensure they provide adequate coverage for the value of stored items.