Blogger’s Note: This article was originally written in September 2009 as an email to clients.

Here are a few excerpts from an article in this month’s Financial Planning magazine entitled: Better Than Nothing:

• Clients are piling up cash for both anticipated spending needs and future opportunities. But where do you put it? In the country of the 0% money fund, the 1% payer is king.
• Financial planners are scrambling to find safe places for cash holdings, along with yields that actually enter single-digit territory.
• “I’ve been using an account that pays 1.05%,” says Rich Chambers….”That may not be great but, as I tell clients, that’s 105 times better than a money market fund paying 0.01%.”
• ….FDIC-insured bank accounts are increasingly appealing. Even so, bank deposits are not fool-proof. Through August, 83 banks failed in the U.S. this year.
• For cash equivalents today, yields above 3% are truly king size. However, investors who don this type of crown may have real reason to feel uneasy. [My note: This last statement refers to the level of risk people are taking with their cash in non-FDIC insured investments.]

Throughout the article, the author quotes “experts” who are heralding 1, 2 and 3% taxable returns, many with market, interest rate and other risks. One more quote:

“An ultra-short fund can lose principal, so these funds are suitable only for clients willing to take a loss.”

Now who wants to LOSE money on their cash savings? Imagine if your traditional savings account went down one month and your bank said, “Well yes, but you did earn 1% on the balance.”

Incredibly, the safest (at least, historically) and higher yielding option of cash value life insurance was NEVER mentioned in the article. While these experts are willing to put your cash at various risks to squeeze out an extra 2% of TAXABLE yield, there is a very low-risk option that historically provides you a TAX-DEFERRED yield of 3-4% (and it can go higher!). In essence, you could follow their advice OR you could store your cash in a lower-risk “investment” with a return 1.8 times better (and that’s 1.8 times better in the lowest tax bracket). Which one do you want?

In bad times you discover good investments. Why? Because you can see what really works versus what was promised in the “good times”. Everyone that I know that has adopted the “insurance bank” concept, especially those that apply the “be your own banker principles”, has now discovered why I consider this to be the “best place to store money.”

If you haven’t shared this concept with everyone in your family, now is the time to do so. Let’s save them from the advice of planners and magazine reporters who still just don’t get it!