Where Do Millionaires Really Stash Their Cash? The Secrets Behind Their Financial Strategies

When we think about millionaires, one of the first questions that comes to mind is how they manage their money. The financial decisions of the wealthy can be a source of fascination and inspiration for those looking to build their own fortunes. So, where do millionaires actually keep their money? Do they park their wealth in checking accounts like the rest of us, or do they have a more complex financial system?

Do Millionaires Use Checking Accounts?

The short answer: yes, but not in the way you might expect. While millionaires don’t rely solely on checking accounts, they do use them for managing their day-to-day expenses. Checking accounts provide easy access to liquid assets, which is important for covering routine expenses or dealing with unexpected costs. This doesn't mean, however, that they hold a large portion of their wealth in these accounts.

A 2023 CNBC Millionaire Survey showed that approximately 24% of millionaires' wealth is held in cash, emphasizing the importance of liquidity. But that doesn’t mean all that cash is sitting in checking accounts. Given that checking accounts offer little to no interest, millionaires tend to keep a relatively low balance in these accounts—just enough to cover a few months of living expenses. After all, any balance over $250,000 is not insured by the Federal Deposit Insurance Corporation (FDIC), so they look for better, insured places to store their money.

The Alternatives: Where Do Millionaires Store Their Wealth?

While checking accounts are convenient, millionaires generally prefer other financial vehicles to grow and protect their wealth. Here’s a look at some popular options:

  1. Savings Accounts
    High-yield savings accounts offer a better return on cash than a typical checking account. These accounts provide liquidity while earning interest rates that are far more attractive—sometimes exceeding 4% compared to the national average of just 0.46%. While savings accounts aren’t ideal for long-term growth, they are perfect for short-term financial goals and emergencies.
  2. Cash Management Accounts (CMAs)
    CMAs, usually offered by brokerage firms, combine the flexibility of a checking account with better interest rates. Many CMAs come with debit cards and even provide FDIC insurance through partner banks, allowing millionaires to manage their liquid assets more effectively.
  3. Money Market Accounts
    These accounts blend the features of both checking and savings accounts, offering competitive interest rates along with the ability to write checks or use ATM access. They require higher balances but offer better returns than standard checking or savings accounts.
  4. Retirement and Tax-Advantaged Accounts
    Millionaires understand the importance of planning for the future, so they take full advantage of tax-advantaged retirement accounts like 401(k)s and IRAs. These accounts allow them to grow their wealth with tax benefits, whether provided by their employers or through individual contributions.
  5. Brokerage Accounts
    Since retirement accounts have contribution limits, many millionaires also invest in taxable brokerage accounts. These accounts allow them to invest in a variety of assets—stocks, bonds, mutual funds—without being restricted by annual contribution limits.

Diversifying Beyond the Bank

In addition to traditional financial accounts, many millionaires diversify their portfolios with other forms of investment. Real estate, for example, is a favorite, whether it’s direct ownership of rental properties or investing in Real Estate Investment Trusts (REITs). Others might put money into commodities like gold or oil, art collections, or even startups and venture capital opportunities. Diversification helps protect their wealth from market fluctuations, offering security and growth over time.

Frequently Asked Questions About Millionaire Money Management

How much do millionaires keep in their checking accounts?
The amount varies, but many keep just enough to cover a few months’ worth of living expenses. It’s rare for millionaires to hold more than $250,000 in a single checking account due to FDIC insurance limits.

What banks do millionaires prefer?
While preferences differ, many millionaires choose banks that offer private banking services tailored to high-net-worth individuals. Institutions like J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank offer perks like personal bankers, waived fees, and wealth management services.

Do billionaires use checking accounts?
Yes, billionaires may use checking accounts, but often these are specialized accounts for ultra-high-net-worth individuals, offering features like higher interest rates, personal bankers, and greater insurance coverage. Some might prefer cash management accounts for their flexibility and higher FDIC limits.

Is it possible to hold a million dollars in a checking account?
While it’s technically possible, it’s not advisable. Since FDIC insurance only covers up to $250,000, millionaires often look for alternative accounts like cash management accounts that offer higher protection and better interest rates.

Related: Compound interest calculator

Key Takeaways

While millionaires do use checking accounts for managing daily expenses, they are savvy about not keeping too much cash in low-interest accounts. Instead, they allocate their wealth across a variety of financial tools, from high-yield savings and money market accounts to diversified investment portfolios. For those aspiring to grow their wealth, adopting a similar strategy—keeping enough liquid for emergencies, while investing the rest in higher-return assets—could be a smart move.

By taking cues from the financial habits of millionaires, anyone can learn to manage their money more effectively and build wealth for the future.