Billionaires use money very differently than the average American. Although most households lean on a savings account as the backbone of a financial plan, billionaires generally see savings accounts as a waste.
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First, the income from savings accounts is taxable, and the last thing billionaires want to do is pay more tax. But savings accounts also typically provide a negative real return, after inflation and taxes are taken into account. As liquidity isn’t usually a concern for billionaires, and they don’t really need traditional emergency funds, there’s not much to recommend about a savings account for the ultra-wealthy.
But if that’s the case, then where do billionaires put their money? Here are just a few common options.
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Their Own Businesses
Probably the most favored investment among billionaires is shares in their own companies. In fact, the path to becoming a billionaire is almost exclusively by creating a world-beating business. Although certain individuals can become millionaires, perhaps even many times over, by investing in stocks and other markets, reaching the 10-digit level usually involves the founding or ownership of a large business.
If you take a look at the Forbes billionaires list, for example, you’ll see that each of the top 10 billionaires — and likely, most of the rest — generated their enormous wealth by founding a company, or at least playing a significant role in its development:
Elon Musk (Tesla, SpaceX)
Mark Zuckerberg (Meta Platforms)
Jeff Bezos (Amazon)
Larry Ellison (Oracle)
Bernard Arnault (LVMH)
Warren Buffett (Berkshire Hathaway)
Larry Page (Google)
Sergey Brin (Google)
Amancio Ortega (Zara)
Steve Ballmer (Microsoft)
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Real Estate
Real estate is a popular investment among billionaires for a number of reasons. First, it’s a tangible asset that is always visible, even during terms of economic panic. While prices may fluctuate, people always need a place to live and work, and this will always give real estate value.
Billionaires, of course, tend to invest in the choicest lots and properties available, meaning they are always coveted, even if they may be only aspirational during uncertain economic times.
Real estate, both residential and commercial, can also provide great returns. In addition to a relatively predictable stream of rental income, real estate can also offer the opportunity to generate fantastic leveraged gains, since investors have to put up only a small amount of the value of a property to own it. Perhaps best of all, real estate can also provide numerous tax advantages, something that’s always on the radar of billionaires.
Private Equity
Private equity refers to owning stock in companies that don’t trade on the public markets, like the New York Stock Exchange. Although individual investors are increasingly gaining access to this secretive market, it has traditionally been the domain of the ultra-wealthy.
According to TIGER21, a peer membership organization for ultra-net-worth investors, private equity represented the asset of choice for its members in 2024, with a 28% allocation. This topped the 26% allocation to real estate, the No. 2 choice.
Stocks
Although few if any billionaires derived their wealth from the stock market, many of them still use it to generate returns on the money they already have. In fact, according to data from the Federal Reserve, as of 2022, the top 10% wealthiest Americans held a whopping 93% of the total value of the U.S. stock market.
Of course, some of this stock market wealth is still tied to the business ownership that most billionaires have. Publicly traded shares of Berkshire Hathaway, for example, account for about 99.5% of Warren Buffett’s total wealth, according to Reuters. While other CEOs may be more diversified, by and large, a large percentage of their fortunes remains invested in company stock.
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This article originally appeared on GOBankingRates.com: Billionaires Don’t Keep Their Money in Savings Accounts — Here’s Where They Put It
