Where do millionaires keep their money?

The word millionaire can mean different things to different people. To some, it means owning assets worth at least $1 million. To others, it means earning over $1 million per year.

Regardless of how you define it, one thing is certain: Millionaires aren’t leaving all their cash just sitting around. Instead, millionaires choose a variety of places to put their money based on the need to protect and access their wealth — and the desire to continue building it.

Whether you’re already a millionaire or aspire to become one, don’t keep all your money in one place. Continue reading to learn where millionaires keep their money, plus tips you can use to save like a millionaire.

You’ve probably heard the popular advice to “not keep all your eggs in one basket.” While this is true in many areas of life, diversification is especially crucial when it comes to your money. Millionaires know this, which is why they spread their wealth among different accounts and investments.

Below are some common places millionaires keep their money to maintain a healthy balance of liquidity and growth.

Cash and cash equivalents

Cash and cash equivalents are highly liquid assets readily available to spend. Unlike other types of assets, you can convert cash equivalents to cash with no or minimal penalty. Investments that fall into this category tend to have maturities of three months or less.

Cash and cash equivalents serve an important role in a millionaire’s portfolio: This money can cover emergencies and short-term savings goals, pay the bills, and fund daily living expenses. Plus, some accounts under this category protect your money with federal insurance.

Specific accounts and investments that are considered cash and cash equivalents include:

While cash and cash equivalents are important for liquidity, having too much cash on hand can make you vulnerable to inflation. That’s because as costs inflate, your cash doesn’t go as far.

Stocks, bonds, and funds

Traditional investments such as stocks, bonds, and funds are less liquid than cash equivalents and don’t offer the same security. However, they tend to have higher rates of return that allow millionaires to grow their wealth over time. As millionaires will attest, investing creates true wealth.

Traditional investments allow millionaires to earn passive income by putting their money to work. For example, stocks allow millionaires to invest in a single company or a pool of companies. Their shares can grow in value, allowing them to cash in on gains or earn dividends on a regular basis. Investing in bonds, meanwhile, is akin to loaning money to a corporation or government in exchange for interest payments.

Stocks, bonds, and funds are highly accessible, whether you’re a millionaire or not. You can purchase stocks and bonds through a variety of different accounts, such as a 401(k), IRA, or brokerage account.

Some millionaires use real estate to build and preserve their wealth. Not only can real estate appreciate in value over time, but it can also provide a source of income for some millionaires.

There are several ways to invest in real estate, all of which can contribute to a millionaire’s wealth. For example, you can purchase a primary residence, potentially building equity over the years and selling the home for a profit. You could also rent out a room in your house to generate passive income.

Some millionaires use their wealth to purchase residential or commercial rental properties. While the properties themselves aren’t liquid assets, they can generate additional sources of passive income.

Finally, millionaires may also put their money in real estate investment trusts (REITs). These are companies that purchase, develop, and operate properties without actually owning physical property.

Private equity and hedge funds

Cash equivalents, traditional investments, and real estate are widely accessible regardless of your net worth. However, certain financial opportunities, such as private equity and hedge funds, are limited to those with significant financial resources.

Private equity funds pool money from various investors to buy an asset, manage it, and eventually sell it. Hedge funds, similarly, are private investment funds that pool money to invest. But unlike private equity, hedge funds focus on short- or medium-term investments and don’t have direct control over the assets they’re investing in.

To invest in a hedge fund or private equity, you generally have to qualify as an accredited investor. This means you either have a net worth of at least $1 million (excluding your primary residence), earn at least $200,000 (or $300,000 as a household) per year, or meet specific professional criteria.

Beyond traditional investments, real estate, private equity, and hedge funds, millionaires may choose to keep some of their money in other alternative investments, such as:

Commodities: Commodities, such as metals, oil, and agricultural products, are raw materials used in the production of goods. These investments can provide a hedge against inflation in a diversified portfolio.
Collectibles: Millionaires don’t just collect art to have something to look at — artwork and other collectibles can be worth a lot of money and grow in value over time.
Cryptocurrency: Crypto is a digital currency that can be used as a form of payment or an investment. While it has the potential for high returns, cryptocurrency isn’t backed by the government, so this investment comes with more risk.

There’s no complex strategy for becoming a millionaire. Instead, many become — and stay — millionaires with a few simple habits.

Here are some ways you can save money like a millionaire:

Pay yourself first. Millionaires tend to prioritize saving and investing before spending. In other words, they pay themselves first. You can do this by automatically shuffling money into savings and investments every time you get paid and only spending what’s left.
Build an emergency fund. Access to liquid cash is crucial for anyone, not just millionaires. Having a stash of three to six months of expenses can tide you over when life throws you a curveball, helping you avoid falling into debt.
Leverage tax-advantaged accounts. Most millionaires invest their money to take advantage of higher returns. And to get an even bigger bang for their buck, they invest in tax-advantaged accounts, such as 401(k)s, IRAs, or Health Savings Accounts (HSAs), when possible. These accounts let you keep more money in your pocket upfront, when you take distributions, or both.
Build passive income. Investing in the stock market is one method of earning passive income, but some millionaires build other passive income streams too. Rental and business income are just two examples of passive income that can grow your wealth with your active involvement. With limited time, passive income can be the key to growing your wealth exponentially.
Think long-term. Though it sounds simple, thinking long-term is key to saving like a millionaire. Doing so allows you to plan for retirement by making educated decisions in the present. Without this foresight, you might unknowingly sabotage your future security and financial goals.