The habits of millionaires are an interesting topic when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are today.
Learning how millionaires accumulate wealth – and where they keep it – can provide valuable insights for anyone focused on growing their money. A common question is whether millionaires keep money in checking accounts.
Research shows that millionaires have kept a significant portion of their wealth in cash in recent years. According to CNBC, that share was about 24% in 2023. While this doesn’t necessarily mean that a quarter of a millionaire’s wealth is in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a useful tool, whether you are a millionaire or not.
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Everyone, regardless of net worth, can find value in a checking account. Checking accounts allow you unlimited deposits and withdrawals, writing checks, paying bills, and other features that help you manage your money on a daily basis.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage day-to-day expenses. Millionaires also recognize the importance of liquid assets, such as money in checking and savings accounts. With accessible cash, you can cover unexpected expenses without having to sell investments, borrow money, or pay a penalty if you tap into your retirement savings early.
The amount of money a millionaire keeps in his checking account is very personal and depends on his preference. However, because checking accounts rarely earn competitive interest, if any, some millionaires deliberately limit their checking account balances. Some may choose to leave the bare minimum, such as a few months’ worth of essential expenses, in their checking accounts, while keeping the rest of their wealth in more lucrative assets.
Regardless of his preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures a maximum of $250,000 in deposits per institution, per account holder.
Although millionaires can use checking accounts for everyday financial transactions, they can also use some of the following accounts in addition to or instead of a checking account:
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Savings accounts: Like checking accounts, savings accounts offer a high degree of liquidity, allowing you to access your money when needed for regular or unexpected expenses. High-yield savings accounts in particular give millionaires extra value for their money. Some of the best accounts currently offer rates of more than 4%, compared to the national average savings account interest rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while remaining more accessible than a savings account. Some CMAs come with a debit card and ATM access, and many offer extended FDIC coverage limits by “swiping” additional deposits to partner banks. CMAs are available from brokers, not banks, allowing easy transfers between investment and cash accounts.
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Money Market Accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and offering checking and ATM access. Banks and credit unions offer these accounts, which are federally insured. The minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and Tax Advantage Accounts: Millionaires understand the importance of investing for their later years, and retirement accounts like 401(k)s and IRAs allow them to do this in a tax-advantaged way. Some retirement accounts, such as 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do this with taxable investment accounts, which can hold investments such as stocks, bonds and mutual funds without contribution limits.
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Other investments, such as real estate, raw materials and art: Some millionaires may decide to diversify their portfolio with other investment types. This may include investment properties such as investment properties or real estate investment trusts (REITs); raw materials, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires keep six figures in their checking accounts to maintain a comfortable cash cushion, others may choose to keep the bare minimum when checking. However, you wouldn’t expect millionaires to hold more than $250,000 in a checking account, as balances above this threshold are typically uninsured.
There is no single bank that is a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to people who meet specific financial requirements. Private banking can include wealth planning services, waived fees, dedicated bankers and additional benefits. JP Morgan Private Bank, Citi Private Bank and Bank of America Private Bank are among some of the most popular banks for millionaires.
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Billionaires may have checking accounts, but they’re likely using accounts that cater to ultra-high-net-worth individuals. These accounts can offer benefits such as a dedicated banker, waived fees and competitive interest rates. Alternatively, billionaires can opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
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There’s no rule that says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. An alternative is a cash management account, which functions like a checking account but typically earns a higher interest rate. Additionally, many cash management accounts insure more than the standard $250,000 by funneling funds to multiple partner banks.
