# Where do rich people keep huge amounts of money? **URL:** \ **Category:** Factual Questions\ **Created:** [July 17, 2011, 11:35am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344 "2011-07-17T11:35:48Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![NAF1138](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/naf1138/32/3245_2.png) [@NAF1138](https://boards.straightdope.com/u/NAF1138)\ **Post date:** [July 18, 2011, 2:23am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/21 "2011-07-18T02:23:28Z")
> [@Princhester](#): > > I’m not sure this answer makes sense. You are saying the biggest reason to avoid banks is because of the risk of them failing but are banks a worse risk than most other investments that you might use instead? > > I doubt this is correct. I think the main reason is just that banks have a low rate of return. Yeah, you only keep what you need easy access to in the bank, and that is because even the best interest earning account won’t earn as much as almost anything else, not because of FDIC insurance. There are just smarter placed to keep your money, particularly if you are talking about large sums. But it wasn’t unusual for us to have a client with 300k or 400k in one of the bank savings accounts if they were the type of person who had a lot of cash going in and out of their accounts regularly. ---
**Author:** ![mac\_bolan00](https://avatars.discourse-cdn.com/v4/letter/m/b3f665/32.png) [@mac\_bolan00](https://boards.straightdope.com/u/mac_bolan00)\ **Post date:** [July 18, 2011, 2:36am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/22 "2011-07-18T02:36:58Z")
my guess is an ATM-checking account where he deposits his check payments and transactions but also his main disbursements. average balance would be in the 5- to 6-figures. ---
**Author:** ![ChrisJones](https://avatars.discourse-cdn.com/v4/letter/c/3da27b/32.png) [@ChrisJones](https://boards.straightdope.com/u/ChrisJones)\ **Post date:** [August 25, 2012, 4:26pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/23 "2012-08-25T16:26:59Z")
The FDIC covers up to a certain amount. Used to be the first $100k. More now? Probably. However I once inquired with a bank manager about this exact subject. I had a customer who lost her husband in the 9/11 attacks. She had previously been taken advantage of by a contractor. I was replacing him. While cashing one of her checks one day I asked the manager about the risks of having more than what the FDIC insures. She told me that in such a case the remainder of the account would be insured privately by a company such as Lloyds of London etc. It makes perfect sense to me. Lloyds IS an insurance company, and insuring large savings accounts sounds like it would be right up their alley. So I think the response of this financial manager was a bunch of bull. 100 million bucks would be perfectly safe in a savings account, providing that it’s a reputable bank. ---
**Author:** ![ChrisJones](https://avatars.discourse-cdn.com/v4/letter/c/3da27b/32.png) [@ChrisJones](https://boards.straightdope.com/u/ChrisJones)\ **Post date:** [August 25, 2012, 4:29pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/24 "2012-08-25T16:29:53Z")
The FDIC covers up to a certain amount. Used to be the first $100k. More now? Probably. However I once inquired with a bank manager about this exact subject. I had a customer who lost her husband in the 9/11 attacks. She had previously been taken advantage of by a contractor. I was replacing him. While cashing one of her checks one day I asked the manager about the risks of having more than what the FDIC insures. She told me that in such a case the remainder of the account would be insured privately by a company such as Lloyds of London etc. It makes perfect sense to me. Lloyds IS an insurance company, and insuring large savings accounts sounds like it would be right up their alley. So I think the response of this financial manager was a bunch of bull. 100 million bucks would be perfectly safe in a savings account, providing that it’s a reputable bank. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [August 25, 2012, 5:14pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/25 "2012-08-25T17:14:20Z")
> [@Exapno\_Mapcase](#): > > It would be nice if it were true that the hugely rich invest gobs of money to create jobs, but there is no actual evidence for this. Unless your definition of “invest” is so elastic to be meaningless. Aren’t stocks and mutual funds investments in companies that employ workers? How are these not creating (or maintaining) jobs? ---
**Author:** ![TimeWinder](https://avatars.discourse-cdn.com/v4/letter/t/bcef8e/32.png) [@TimeWinder](https://boards.straightdope.com/u/TimeWinder)\ **Post date:** [August 25, 2012, 5:28pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/26 "2012-08-25T17:28:33Z")
> [@echo7tango](#): > > Aren’t stocks and mutual funds investments in companies that employ workers? How are these not creating (or maintaining) jobs? Assuming I’m not being wooshed, you know it doesn’t take more brokers to invest $1000 than it does to invest $1, right? More money in the system doesn’t mean more hiring. [Quote=Exapno Mapcase] It would be nice if it were true that the hugely rich invest gobs of money to create jobs, but there is no actual evidence for this. [/QUOTE] That actually doesn’t go far enough: there’s plenty of evidence for the converse. Notably, that in the last twelve years of huge tax breaks for the rich, personal fortunes have increased considerably. Yet we’re somehow not swimming in jobs, in fact, quite the opposite. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [August 25, 2012, 5:37pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/27 "2012-08-25T17:37:18Z")
> [@echo7tango](#): > > Aren’t stocks and mutual funds investments in companies that employ workers? How are these not creating (or maintaining) jobs? I assume Mr. Mapcase was referring to investments in the “secondary” market: most shares already existed before you purchase them, so your purchase isn’t “new” investment. But in that case Mr. Mapcase’s answer is incomplete since your purchase frees up money for the stock seller. Eventually, as this money changes hands it will find its way to something other than the secondary stock market, e.g. an IPO or family business. Of course the money could end up being used to buy cocaine or entertainment at a casino or whorehouse! 😛 Still, even then it’s helping to create jobs. 😃 ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 25, 2012, 5:38pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/28 "2012-08-25T17:38:59Z")
> [@echo7tango](#): > > Aren’t stocks and mutual funds investments in companies that employ workers? How are these not creating (or maintaining) jobs? Unless you are buying stock in an initial public offering (IPO), none of your investment goes to the company you are investing in. You are buying stock from another stockholder in the hope that the stock will go up; he is betting the stock will go down. They only way the company you are investing in gets capital out of the deal is if the price goes up due to demand from you and other people buying stock, and they sell more company-owned stock to raise cash. But your investment doesn’t directly create jobs. ---
**Author:** ![njtt](https://avatars.discourse-cdn.com/v4/letter/n/ecd19e/32.png) [@njtt](https://boards.straightdope.com/u/njtt)\ **Post date:** [August 25, 2012, 5:49pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/29 "2012-08-25T17:49:04Z")
> [@echo7tango](#): > > Aren’t stocks and mutual funds investments in companies that employ workers? How are these not creating (or maintaining) jobs? You are getting the causal order backwards. Increased demand for goods and services causes companies to have a need to hire more workers, and in such circumstances they seek investors in order to finance this expansion, and it becomes worthwhile to invest in them. Investing in companies that cannot sell any more of their products or services does not create any jobs, and is probably going to be a very poor investment to boot. So no, investment does not create jobs, demand creates both jobs and opportunities for investment. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [August 25, 2012, 5:52pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/30 "2012-08-25T17:52:21Z")
> [@septimus](#): > > I assume Mr. Mapcase was referring to investments in the “secondary” market: most shares already existed before you purchase them, so your purchase isn’t “new” investment. > > But in that case Mr. Mapcase’s answer is incomplete since your purchase frees up money for the stock seller. Eventually, as this money changes hands it will find its way to something other than the secondary stock market, e.g. an IPO or family business. Of course the money could end up being used to buy cocaine or entertainment at a casino or whorehouse! 😛 Still, even then it’s helping to create jobs. 😃 Thanks for making clear why I used the dismissive qualifer “Unless your definition of “invest” is so elastic to be meaningless.” It’s true that every exchange of money is part of the larger economy. But it’s obviously possible for the number of jobs in the total economy to shrink even when money changes hands. So this activity does not necessary create jobs - it’s the same as trickle-down theory, which we know to be wrong. And I can’t see any way to call it an investment in the normal sense. Your spending your payback would be an investment in job creation by this standard and that’s meaningless. Jobs are created by the hugely rich. And by the slightly rich. And by the middle-class. But keeping your money in the standard locations - stocks, bonds, real estate, precious metals, collectibles, etc. - is not what’s doing it. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [August 25, 2012, 5:54pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/31 "2012-08-25T17:54:11Z")
> [@njtt](#): > > You are getting the causal order backwards. Increased demand for goods and services causes companies to have a need to hire more workers, and in such circumstances they seek investors in order to finance this expansion, and it becomes worthwhile to invest in them. Investing in companies that cannot sell any more of their products or services does not create any jobs, and is probably going to be a very poor investment to boot. So no, investment does not create jobs, demand creates both jobs and opportunities for investment. You are unnecessarily limiting the possible scenarios. Investing in companies that _ **can** _ sell more products does create more jobs. Companies have to be able to support the increased need. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [August 25, 2012, 6:10pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/32 "2012-08-25T18:10:12Z")
> [@Exapno\_Mapcase](#): > > Thanks for making clear why I used the dismissive qualifer “Unless your definition of “invest” is so elastic to be meaningless.” You missed the point. I wrote “Mr. Mapcase’s answer is incomplete” to be polite. “Completely wrong” would have been almost as accurate. Viewing the stock market as a black box, the money (banknotes etc.) in on a given day will equal the money out. If Mr. A buys $10,000 of stock, there is some Mr. B who has $10,000 of cash he didn’t have before. ($10,000 may not be enough to have significant job creation potential, but that’s beside the point.) The extra $10,000 will be invested or spent. It may very well be spent on an IPO or family business and that’s investment that would not exist unless the stock market were propped up by Mr. A and other investors like him. True, the money is likely, especially in today’s environment, to end up instead as wasted financial paper in a bank vault, or as a cocaine purchase, but the essential point remains: Stock purchases generally have the effect of net investments whether placed directly into IPO’s or into the secondary market. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [August 25, 2012, 6:12pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/33 "2012-08-25T18:12:06Z")
> [@echo7tango](#): > > You are unnecessarily limiting the possible scenarios. Investing in companies that _ **can** _ sell more products does create more jobs. Companies have to be able to support the increased need. You can invest in companies, but only at very limited times, usually when new shares of stock are being issued. Otherwise, sales of stock do not flow back to the company. Since non issue sales are probably 99.999999% of all stock purchases, investing in stocks is a very different procedure from investing in a company. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [August 26, 2012, 3:51am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/34 "2012-08-26T03:51:11Z")
> [@Exapno\_Mapcase](#): > > You can invest in companies, but only at very limited times, usually when new shares of stock are being issued. Otherwise, sales of stock do not flow back to the company. Since non issue sales are probably 99.999999% of all stock purchases, investing in stocks is a very different procedure from investing in a company. Where do sales of stock flow to, then? The company sees none of it? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 26, 2012, 4:15am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/35 "2012-08-26T04:15:29Z")
> [@echo7tango](#): > > Where do sales of stock flow to, then? The company sees none of it? Other stockholders who want to sell stock. The company sees none of it, unless they sell stock they own, which is rare compared to the volume of stock sold by stockholders. ---
**Author:** ![Leo\_Bloom](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leo_bloom/32/10377_2.png) [@Leo\_Bloom](https://boards.straightdope.com/u/Leo_Bloom)\ **Post date:** [August 26, 2012, 7:28am UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/36 "2012-08-26T07:28:49Z")
Opening that account the guy better be given _two_ toasters. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [August 26, 2012, 3:40pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/37 "2012-08-26T15:40:20Z")
> [@Fear\_Itself](#): > > Other stockholders who want to sell stock. The company sees none of it, unless they sell stock they own, which is rare compared to the volume of stock sold by stockholders. So when the company sells stock, they get money and they can then hire more people. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 26, 2012, 4:00pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/38 "2012-08-26T16:00:24Z")
> [@echo7tango](#): > > So when the company sells stock, they get money and they can then hire more people. Yes. This rarely happens. ---
**Author:** ![FuzzyOgre](https://avatars.discourse-cdn.com/v4/letter/f/a587f6/32.png) [@FuzzyOgre](https://boards.straightdope.com/u/FuzzyOgre)\ **Post date:** [August 26, 2012, 4:15pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/39 "2012-08-26T16:15:47Z")
> [@echo7tango](#): > > So when the company sells stock, they get money and they can then hire more people. And eventually run out of majority shares in their company, thus ceding control to whoever now does. You can see they might not always want to do that. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [August 26, 2012, 4:28pm UTC](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344/40 "2012-08-26T16:28:42Z")
> [@Fear\_Itself](#): > > Yes. This rarely happens. And it is balanced off by [stock repurchases](http://en.wikipedia.org/wiki/Share_repurchase) by companies. [Previous page](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344.md?page=1) [Next page](https://boards.straightdope.com/t/where-do-rich-people-keep-huge-amounts-of-money/589344.md?page=3)