The Best Account for Your Life Savings

You have worked hard to get where you are today.  You aren't rich but you've amassed enough money that you don't want to just leave it in the change jar.  Most of us live in the realm somewhere between poor and rich and the thing we most want is to make sure our finances are secure.  Getting a good return is nice, since we want our money to be working for us, but ultimately we don't want to see everything we've worked for disappear.  What is the best account to trust with your life savings?

It's important to understand risk and reward.  Most investments and savings options reflect some element of both.  Typically the higher the risk, the higher the average reward.  So the ideal account will balance your tolerance for risk, your position in life and your need for access to your money.  There are a wide variety of options.

Ultimately however, the key thing to understand is that there is no one best account for your life savings.  Because you are concerned about security it makes perfect sense to have diversity in your accounts as well as diversity in your investments.  Take for example the many investors who lost their life savings with Bernie Madoff.  They actually thought they were making a wise decision.   They thought their money was safe and hundreds of other people agreed with them.  However, when the time came they lost everything.  Even if you think your money is 100% safe, it makes sense to put it in multiple places.

Another key reason to break up your accounts is the types of insurance that are typically associated with these accounts.  FDIC and SIPC insurance are both limited by the amount of money you have with the institution.  This provides an additional incentive to break up your accounts.  Not only does it reduce the risk of all your money being lost in a bank failure, scam or other crime, it increases your protection via insurance. 

Thus while many of us would like the convenience of entrusting one person or institution with our life savings, it rarely makes sense.  In the same way you seek diversity in your investments, your savings should represent some of that same diversification.  Thus there is no best account for your life savings, but instead many best accounts for your life savings.