Like many, I grew up receiving much advice from my parents who were very loving and well-intentioned though not always Gandalf-wise on all subjects, including finances.
For them, and thus instilled in me, good financial habits included "saving my pennies for a rainy day" (which started as a piggy bank then later a bank account), and spending less than you earned. These family financial "commandments" still remain relevant and very useful today. While they are beneficial pieces of parental wisdom, they're also lacking and don't go far enough which I've learned over the years as an "adult".
Probably like you, when I started out on my financial journey, I put my "pennies" - as a kid from gifts and change, then later as a teen from part-time jobs, then as an adult from employment - into a bank account. These "good" habits forged into me by my parents meant that my hard-earned $ would be safe, out of sight from frivolous spending at the arcade and corner store, would grow through the powers of patience and compounding interest eventually sprouting a little nest egg in the future. All of this seems like sound advice backed by loving intentions and likely familiar to you so far, right??
Well it certainly didn't take long for reality to set in. My money in my bank savings account, depending on the inflation rate, would usually earn less than inflation, and, as interest income, I paid 50% tax each year, plus account fees! So my hard-earned $ from baby-sitting, mowing lawns, pumping gas as a teen, and throughout my adult life, was being chipped away by others and my nest egg was in fact not growing at all - in fact it was shrinking. These days, I see some banks offering savings account at 4.5% - 5% though with real inflation around 10% (maybe even higher) I'd still be losing and paying tax. My parents never finished their advice to ever mention these financial pitfalls to me....c'mon dad!!!
Especially these days, there is less of a compelling reason to leave large amounts of cash in a bank account for all of the reasons mentioned above, plus more such as being asked by the teller what you need it for upon withdrawal, withdrawal limits at the ATM, the risk of bank bail-ins, privacy, government control and regulation, and on and on.
Is there a way that I (and you!) can be my (your) own bank??? Yes!
I figured there must be a better way to protect and preserve my money and have it grow uninhibited and free from the greedy hands and eyes of others who take their cut without ever having asked me in the first place. I needed to remove myself from this financial slow death "system" which was penalizing me for working hard (more taxes) and diligently saving my "pennies" (inflation) like my parents taught me.
One way is by being your own bank using precious metals, particular gold as it is less volatile than silver. When you own physical precious metals, there is no counter-party risk as you own it AND can hold it tax-free in many cases, no account fees and charges (unless you pay for storage), and protects and grows my wealth especially during times of high inflation and instability. For example in Canada in 2022, average official annual inflation was close to 8% which meant that our purchasing power in fiat currency dropped by 8% - and any $ held in a bank account was reduced by 8% (in addition to any fees, taxes). I believe inflation was actually considerably higher (over 10%) as fuel and food weren't included in the rate calculation - sneaky devils eh? During this same period, gold held steady and returned 1% meaning it preserved purchasing power and actually when up 1%. So far in 2024, the price of gold has increased almost 20% and silver is up over 30%. I can't say that at all about worthless fiat dollars.
If I'm my own bank with precious metals, how do I pay for normal every-day expenses?
Keep enough cash in your bank account every month to pay for regular expenses such as mortgage, loan payments, utilities, groceries, etc., and take out excess to swap for precious metals.
Keep some cash on hand at home, such as $1,000, which can be useful for example when the power goes out and you need to buy essential items such as gasoline, food, supplies, etc.
When you need fiat money for unexpected or special expenses, you can simply make a "withdrawal" from your precious metals by trading it in at a local coin shop to fund your purchase.
In this model, you'll likely be comforted knowing that you hold your money (using a safe and secure manner), that you are free of bank fees or taxes, you have privacy, and that you'll be preserving your purchasing power and growing your wealth over time. Plus, you'll likely spend less, especially on frivolous items, with the extra step of having to go to the local coin store to swap for cash.
My parent's financial "commandments" still reign true for me today but just imagine if I had traded my pennies in a piggy bank for gold and silver coins in a safe? Today, I am passing on these "commandments" to my kids but with the added wisdom of the benefits of being your own bank 🏦
Sound financial management which meets your needs and situation is a key element of providing choice, independence and personal fulfillment - key pillars of our community.
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