When do the rich keep their money in the bank?

There are times when even the rich keep their money in the bank. When deciding what is right for you consider the amount of time before:

SHORT-TERM

If you are keeping your money in the bank to save for something important (hopefully, for a deposit on an income producing property?), Then do not be overly concerned or worry about the interest rate or inflation.

MEDIUM TERM

If you have a sum large'ish you are building something important to say from 3 to 5 years, then a better 'savings account' would be a low-cost index fund ... how to save enough to meet the minimum investment criteria, falling into ... just be prepared to hold for at least MEDIUM TERM

LONG TERM

If you are, for example, 7 to 70 years before retirement, is in how to invest your life, and (a) are unlikely to have your money in the bank, and (b) are crazy if you do! More than 7 years or more, yes, ridiculously low investment returns (and, to a lesser extent inflation) will eat your future alive!

Putting your money in any mix of index funds, business opportunities, investment property, direct investment stock - keep away from mutual funds - as befits your personality profile and the desire to get rich vs. only keep pace with Jones middle class.

SUPER LONG TERM (a.ka. Retirement)

Here is where a low interest / inflation combo (even if inflation is only 2% or 3%) will eat you alive ... be prepared to be withdrawn for a long time, say 30 to 50 years (even if you die young, at least the spouse and children will be happy with their nest egg!) ... You do NOT want your money running out before you.

If you have a lump sum, there are only a few choices:

- Put everything in an index fund and just draw down 2.5% - 3.5% per year to live.

- Put everything in income producing real estate and spend no more than 75% of the rent (after paying the mortgage and build a suitable buffer to avoid 'problems')

- Put everything in TIPS (inflation-protected Treasury bonds) and live happily every interest that you pay every 6 months

- Implement a strategy of bond laddering, which claims to be able to make you live up to 6% or 7% of capital at retirement each year

- Any combination of the above that fits your investment needs and 'personality'

Each of these strategies is relatively "inflation-proof" in that you get to increase the amount that you take every year as a 'wage' to live, and pay more interest in general that the bank will give you (perhaps expect , the links ... you pay a 'price' for the inflation-hedge) ....