Why Do People Keep Excess Money In The Bank?

January 12, 2016, by Ken Jorgustin


What is the reason why people keep their money in the bank? Is it because that’s what they’ve been taught to do…to ‘plug in’ to the system?

Why do we do that, and are there better things to do with one’s excess money than keeping it on deposit in ‘the bank’?

People put their money in the bank, partly because it’s just what they do… it’s what they’ve always done and so they’re going to keep doing it. It’s mainstream. It’s the expected thing to do. It has been programmed into their psyche. It is normalcy bias.

People put their money in the bank because most employers have ‘direct deposit’ for convenience, and it happens automatically. Digital digits. A digital world.

But what if you’re fortunate enough to accumulate extra money beyond your monthly expenditures? Why let it accumulate in the bank?

While people used to keep money in the bank to earn interest, the fact is that for years upon years there has been essentially no interest paid whatsoever on deposited ‘bank money’, so why leave it there?

People put their money in the bank for so called, ‘safe keeping’, right?

I suppose that people are generally uncomfortable keeping quantities of cash at home, although there are fairly easy measures to take which will help ensure its security…

Certainly today’s federal regulations make it difficult (and potentially suspicious) to transact quantities of cash – which on the face of it is disgusting – because it’s YOUR money… so most people will leave it in a bank (in the system) so as to ‘fit in’ and transact digitally.

But lets face it. It has seemingly become pretty risky to keep excess money in the bank – given the systemic risks that we’re facing within our current financial system. Additionally, an apparent fact is that your money on deposit is now considered ‘unsecured collateral’ with the bank. While your money is insured via the FDIC, the fact is that in a systemic financial collapse, there is only a very small percentage of FDIC money available (it was not designed for major bank failures), and you would likely lose your money – or spend years waiting to get any of it back if at all.

So if it’s risky to keep your excess money in the bank, and if it’s even more risky to play (invest) the stock market, then what is one to do?

One suggestion is to keep enough ‘rolling’ money in the bank to service monthly expenditures. Keep some extra there too, just in case you need a major purchase. But once you feel comfortable with keeping ‘enough’ in the banking system, then you might ‘invest’ some of your excess into YOURSELF, your preparedness, your self-reliance, your self-sustainability, your homestead, your security.

If you’re reading this blog, chances are that you’re not mainstream-typical. You recognize that we’re truly living in perilous times. You understand (at least generally) many of the systemic risks that we’re facing. You are probably more likely to ‘invest’ in non-conventional ways. You are probably becoming (or have become) your own banker.

Although sometimes I do break the following rule (sometimes to my detriment), it’s usually best to diversify. When we’re talking about what to do with one’s extra money, it’s probably a good idea to spread it around a few places. Don’t put all your eggs in one basket, but keep a few here, a few over there, and a few way over there…

That means keeping ‘some’ in ‘the system’. The bank. That means keeping some at home (a challenge while determining ‘how much’). Perhaps converting some of that cash into precious metals. But even more important (in my opinion) is significantly shoring up your preparedness and the tangible assets that will enable you to become as self-sustainable as possible.

We don’t know the full extent to which the system will collapse (it mathematically must – so don’t fool yourself that it will not). This is the challenge. If we only knew (the extent of the future collapse), then we could more effectively proportion our money today – in preparation for tomorrow. To prepare (invest) for a full-on SHTF collapse is a far stretch from investing towards a partial (for example).

But with that said, I do believe that one’s excess cash is FAR BETTER SPENT on setting up a homestead type environment (and all that goes along with that) BEFORE investing in other areas for diversification. The mainstream would scoff at this, but I really don’t care. At the most basic of levels, it’s about taking care of and securing YOURSELF before investing elsewhere. Invest in yourself first.

So again, if one is fortunate enough to be sitting on excess funds in the bank, why would one leave it there?

What are your thoughts on diversification of excess money? It’s certainly different for everyone, because everyone is individually surrounded by their own circumstances. But we could draw some hypothetical generalizations…

Disclaimer: This is not ‘financial advice’, although it is opinion…