How to Store Money Without a Bank

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Contributor, Benzinga
June 18, 2023

You may have several reasons to store money without a bank. Maybe you want easier access to funds or a flexible solution to store your financial assets. Or you might be in the process of increasing your net worth and looking for new investment opportunities. Whether you’re diversifying investments or have difficulty opening a traditional bank account, you can find a number of ways to store money without a bank. Many high-net-worth people store only a portion of their wealth in the bank. Read on to learn how to store money without a bank.

What Does Storing Money Without a Bank Mean?

Storing money without a bank means choosing one or several alternative solutions. People may have different reasons to choose alternatives to bank accounts, from wanting to diversify money storage to prioritizing increased returns. Many wealthy individuals store a portion of their funds in alternative storage. 

The pros of storing money in a bank are relative security, government-backed Federal Deposit Insurance Corporation (FDIC) insurance and ease of accessing funds. The pros of alternative storage solutions include higher returns for building wealth, flexibility and ease of accessing funds. Alternatives to a bank can also offer improved access to funds and peace of mind. 

How Does Storing Money Without a Bank Work?

The principles and mechanisms behind storing money without a bank depend on the system. With a physical safe, for example, you would keep cash, gold, silver or other valuables in a heatproof, waterproof safe. 

You also could use a digital wallet to store cryptocurrency or digital currencies.

Alternative investments like art, wine, gold or gems can have different storage solutions for increased security. And with real estate, your money is in physical property.  All of these options offer relative security but come with risks. 

Key Steps for Storing Your Money Without a Bank

Here is an overview of the essential steps you should take to store your money in options other than banks.

Step 1: Explore Secure Online Payment Platforms

Secure online payment platforms are alternatives to traditional banking. These include PayPal, Google Pay, Apple Pay, Facebook Pay and Stripe. These platforms allow you to receive, store and send funds without a traditional bank account.  

Step 2: Use Digital Wallets

Digital wallets are apps or online services that allow you to make payments electronically or to store documents, tickets and other items of value electronically. With the growing popularity of cryptocurrency, digital wallets are an alternative to traditional bank accounts for storing money. 

In addition to digital wallets, you can get physical wallets for storing cryptocurrency and other digital assets more securely. These usually look like a large USB stick or a small hard drive. 

Step 3: Consider Peer-to-Peer Lending

Peer-to-peer lending is an alternative to storing money with a bank. Peer-to-peer lending platforms connect lenders and borrowers directly. For borrowers, the benefits include lower interest rates, easier loan qualification and faster approval times. 

For lenders, the benefits include higher interest rates than traditional savings accounts and the ability to help others. Peer-to-peer lending comes with risks, including the potential for default on loans and limited protections for investors.

Step 4: Invest in Alternative Assets

Alternative assets include cryptocurrency, real estate, precious metals, wine and art. You can also consider investing in real estate investment trusts (REITs), crowdfunded real estate or traditional asset classes like gold and silver. You can invest in gold or silver stocks or purchase coins, jewelry or other physical products to store securely. 

Step 5: Maintain a Physical Safe or Vault

Options for maintaining a physical safe or vault include home safes and safety deposit boxes. Look for fire-safe and water-safe options for a home safe. You can also choose a bank safety deposit box as an alternative to a savings account to store cash or other valuables like gold, jewelry or antiques. 

Factors to Consider When Storing Your Money Without a Bank

It’s important to weigh the security, risk, fees and future growth of alternatives to a bank account. Here is what to consider when selecting alternative options for storing your money.

Security

Whichever option you choose, look for money storage options with robust security measures such as encryption protocols, authentication methods and physical safety measures to safeguard funds and reduce the risk of theft or loss. 

Reputation and Reliability

Carefully assess the trustworthiness and track record of the chosen storage method to locate the best places to save money. Conduct research, read reviews and consider testimonials before choosing alternatives to store money. 

Accessibility and Convenience

Weigh accessibility and convenience carefully if you want easy access to your funds. Few storage methods are as easily accessible as a physical safe or a digital wallet. Consider user-friendliness, customer support availability and the ability to deposit or withdraw funds efficiently.

Fees and Costs

Different types of fees, such as transaction or storage fees, can impact overall returns and the ability to build savings. While more convenient methods may come with higher fees, carefully consider whether these fees are justified for convenience and security. Your chosen storage method may not make sense with especially high fees.

Be sure to check anti-money laundering (AML) compliance for your respective money storage choice and ensure that they meet know-your-customer (KYC) laws, especially when choosing alternatives like peer-to-peer lending. You must adhere to all legal compliance requirements. If in doubt, check with a financial lawyer on compliance standards and requirements. 

Risk and Return Profile

Evaluating the risk and return potential of the chosen storage method or alternative investment. For example, storing cash in a safe at home has low risk, but it also means you’re missing out on financial returns that can ensure your wealth grows more than inflation. At the other extreme, peer-to-peer lending or stock market investments can offer good returns but come with greater risk. 

Backup and Recovery Options

For digital wallets, online banks, peer-to-peer lending systems and brokerage accounts, backup and recovery options in case of data loss or security breaches are essential. Research security measures and recovery options before storing your money with a nontraditional or noninsured institution. 

Financial Expertise

When choosing to store money without a bank, assessing your financial knowledge and expertise in managing alternative storage methods or investments is essential. It’s important to assess your expertise and consult financial advisers or other experts to ensure the best secure money storage solutions to protect your wealth long term. 

Future Scalability

When choosing how to store money without a bank, assess whether your chosen method can accommodate potential growth in funds or investment portfolios without limitations or complexities. While it’s OK to stash $1,000 in a safe for an emergency fund, it won’t offer the future scalability of other investments or money storage solutions. 

Perks of Storing Your Money Without a Bank

Ready to get started building a diverse money-storage plan? The advantages of storing your money without a bank as part of a diverse long-term financial plan are significant. Here’s an overview of key benefits. 

Increased Control 

When you choose alternatives to a bank, you can increase control and access to your funds. From a safe to digital wallets, you can access funds when you need them and more closely monitor their growth. 

Potential Higher Returns

With some asset classes and investments, there is the possibility of higher returns and greater growth of wealth in the short and medium term. While they usually come with risks, they can offer potential rewards.

Diversification

Choosing different ways to store money without a bank is a smart financial move for diversification. For example, you could buy gold bars, hold cryptocurrency in a digital wallet, invest in peer-to-peer lending and store gems in a safe. With such as diverse portfolio, you may feel more secure in case of market fluctuations or variations in one asset class. 

Access to Alternative Investments

When you’re focused on how to store money without a bank, you can also access alternative investments, including art, wine, gold and silver or environmental, social and governance (ESG) funds to balance your portfolio between risk and return. 

Drawbacks of Storing Your Money Without a Bank

You should be aware of some of the disadvantages of storing your money without a bank before making your financial plan. 

Lack of Deposit Insurance

An advantage of traditional banks is government-backed insurance. Bank accounts are FDIC-insured up to $250,000 per account holder. That means you'll get your savings even if the bank collapses. Most alternatives to banks don’t offer this type of security or guarantee. 

Limited Regulatory Protection

Many alternatives to storing money without a bank come with limited regulatory protection. This is especially true in emerging markets like cryptocurrency, where you could earn a lot or lose everything. To protect against these variations, be sure to research insurance and regulatory compliance and diversify how you store money. 

Security Risks

Security risks vary by options to store money. If you choose a digital wallet or store your money on a cryptocurrency exchange, for example, there is a risk that hackers could access your funds. Weigh security risks and understand protection options for your chosen methods of money storage. 

Where to Save Money

Where to save money varies by each person and their goals. As it’s clear from the options here, you have choices beyond a traditional bank account. While a high-yield savings account is a smart place to keep an emergency fund, you can also save money in digital wallets, online payment services, peer-to-peer lending and with physical assets like precious metals, gems, wine, art or other assets. Diversifying money for growth can help mitigate risk, but with so many options, each person will have a unique balance that can optimize long-term financial growth.

Frequently Asked Questions

Q

Is it legal to store money without a bank?

A

Yes, it is legal to store money without a bank. Options include investment and brokerage accounts, real estate, gold and silver, wine, art and cryptocurrency. If you choose to store money with an alternative to a bank, check its anti-money laundering rules and know your customer compliance requirements.

Q

What are some alternative ways to store money without a bank?

A

Alternative ways to store money include investment accounts and physical assets like gold, silver, real estate, gemstones, art or wine. You can also consider storing money in a safe; digital wallet; using online money storage options like Paypal, Apple Pay or Google Pay; or using a Post Office savings account.

Q

What security measures can I take when storing money without a bank?

A

Security measures you can take when storing money without a bank include checking the security and reputation of the platform you plan to use. You can also diversify money storage options so you don’t keep all your funds in one or two places. Be sure to check the fees, accessibility and risk profiles of your chosen money storage options.

About Alison Plaut

Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.