JUNE 21, 2021
The Three Worlds of Money consists of the Banking world, the Insurance world, and the world of Wall Street. The Banking world being the most familiar with standard checking and savings (then maybe eventually moving into CD’s etc.) is considered extremely safe in general. Most are typically introduced to banks or the concept of banking accounts at a pretty early age, with the most basic premise being to develop a relationship with the institution guarding your money, and potentially borrowing funds for larger purchases to be paid back pay back over time. The problem with using the Banking world as your primary savings vehicle is the risk of inflation outpacing your savings.
It is a common error to misuse the banking industry by solely relying on this world to grow your money while keeping it safe, especially when you consider most of us are paying monthly fees to keep our money there. Often these charges are dismissed or ignored because it is such a slow drag. They just know they’re not losing anything, until they wake up one morning and realize that money doesn’t go as far as it did 20 or 30 years ago. The built-in liquidity of traditional banking is appealing, and remains a concern, but a more strategic approach is to utilize at least two of the three worlds together, with further mitigation of risk through diversification within these sectors. Depending on your personal needs now and in the future, there are a multitude of vehicles for money investments and savings.People often dismiss the fees involved with traditional checking and savings accounts because it is such a slow drag. they just know they’re not losing anything, until they wake up one morning and they realize that money doesn’t go as far as it did 20 or 30 years ago.
The second world, Insurance, is bigger and more complex than most people realize. Over the past 20 years this sector has grown in popularity as part of an overall retirement/savings plan offering not only protection by preserving the initial investment, but by potentially providing growth and planning for future income as well. Fixed index annuities and universal life policies can be used for this purpose with a large amount of hybrid products offering a way to build a customized plan for your particular needs. The Insurance world can also be misused, whether by not using it enough (or not at all) or relying on it too much, and withdrawing funds too soon defeats the purpose of the long-term gains and/or future income plans if there is no liquidity from another sector – like banking.
People often dismiss the fees involved with traditional checking and savings accounts because it is such a slow drag. They just know they’re not losing anything, until they wake up one morning and they realize that money doesn’t go as far as it did 20 or 30 years ago.
Lastly, there is the world of Wall Street. Many people think of the stock market and immediately imagine explosive growth or devastating losses from high-risk investments, and yes, the bottom line is there are no guarantees – people can, and sometimes do, lose everything gambling in this sector. Liquidity is there, in that you can generally sell securities within a fairly short window, but depending on the volatility of the market, there may very well be a lot less available than what you started with. Proper management, savvy investments, and realistic expectations can potentially yield a balanced portfolio, but it shouldn’t be the only world your money is placed within.
Having a grasp of what is involved with each of these three worlds coupled with your overall comfort level is critical. There’s no magic ball to tell you when the market is going to go up or down or how much inflation will grow this year, but by utilizing each of these three worlds you can potentially achieve overall growth with both liquidity and protection in mind. Providing a GamePlan to guide you on your path is our ultimate goal and educating you on what is available is the first step in that journey.