There are only 3 places where people can put their money. They are Banks, Money Management companies, and finally Insurance carriers. The financial history of Banks and Money Management companies are less than to be desired even though the government, banks, and financial companies do their best to convince you that they are secure.
The world of money and how it works is not as difficult to understand as you might imagine. But let us take a look at banks.
Banks:
Banks are regulated but they have a lot of power in Washington. There are states that have laws that you can go to jail for just writing or talking about how bad your bank or the banking industry really is.
Banks and the deposits are FDIC insured. Bank accounts are insured that you will not lose your money. Who pays for this insurance, why we do as tax payers. The insurance only covers deposits up a declared cap and can be paid back over 10 years. Check the FDIC for a list of failed banks and I guarantee your jaw will drop. By the way, the Banks were bailed out by tax-payers.
Money Management Companies (Financial Institutions):
These companies promise they will take care of your money and make you nice returns on your money. Everybody is a financial genies when the market goes up but what happens when the market goes down?
Your accounts are subject to management fees, broker fees, and other fees. In mutual funds there is a fee called a turnover ratio fee and no one can explain how much that will cost you because they do not know how many times the fund manager will have to turn over the whole portfolio to make a profit. By the way, some of these companies were "Too Big to Fail."
Insurance Industry:
Take a look at history. The insurance industry is the heavy weight in the world. Governments have borrowed money from insurance companies during the Great Depression. ING helped fund the Louisiana Purchase for the United States.
What happens when an insurance company goes under? If they do, they usually get bought by another company for penny's on the dollar. Also most states have a guarantee association that covers up to $100,000 - $200,000 of deposits.
Products such as fixed indexed annuities are fixed and are regulated by insurance departments and are required to have a much higher amount of their assets in a reserve fund than banks and financial institutions. Banks are allowed to do fractional banking and loan out more money than they have in reserve.
Conclusion:
If you want to go with a safer savings vehicle take a look at regulated insurance products like a fixed annuity or indexed universal life insurance products. You will not have to worry about losing your principal and interest gains.
The world of money and how it works is not as difficult to understand as you might imagine. But let us take a look at banks.
Banks:
Banks are regulated but they have a lot of power in Washington. There are states that have laws that you can go to jail for just writing or talking about how bad your bank or the banking industry really is.
Banks and the deposits are FDIC insured. Bank accounts are insured that you will not lose your money. Who pays for this insurance, why we do as tax payers. The insurance only covers deposits up a declared cap and can be paid back over 10 years. Check the FDIC for a list of failed banks and I guarantee your jaw will drop. By the way, the Banks were bailed out by tax-payers.
Money Management Companies (Financial Institutions):
These companies promise they will take care of your money and make you nice returns on your money. Everybody is a financial genies when the market goes up but what happens when the market goes down?
Your accounts are subject to management fees, broker fees, and other fees. In mutual funds there is a fee called a turnover ratio fee and no one can explain how much that will cost you because they do not know how many times the fund manager will have to turn over the whole portfolio to make a profit. By the way, some of these companies were "Too Big to Fail."
Insurance Industry:
Take a look at history. The insurance industry is the heavy weight in the world. Governments have borrowed money from insurance companies during the Great Depression. ING helped fund the Louisiana Purchase for the United States.
What happens when an insurance company goes under? If they do, they usually get bought by another company for penny's on the dollar. Also most states have a guarantee association that covers up to $100,000 - $200,000 of deposits.
Products such as fixed indexed annuities are fixed and are regulated by insurance departments and are required to have a much higher amount of their assets in a reserve fund than banks and financial institutions. Banks are allowed to do fractional banking and loan out more money than they have in reserve.
Conclusion:
If you want to go with a safer savings vehicle take a look at regulated insurance products like a fixed annuity or indexed universal life insurance products. You will not have to worry about losing your principal and interest gains.