Experts who work with the wealthy and observe their spending habits say rich folks are sitting on their cash. Just like the rest of us, they're worried about the future.
Suddenly uncomfortable with the nation's financial volatility, the wealthy are revisiting their investment and savings strategies, says Chris Geczy, the director of the Wharton Wealth Management Initiative at the Wharton School in Philadelphia.
"They're consuming less and saving more," Geczy says.
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Like so many other Americans, the affluent were "overextended" in real estate and investments gone sour, he says. Now they are more likely to invest in fixed-income vehicles. "They're still scared of risk," he says.
Investment professional Nancy Rooney has noticed this fear, too.
"There is a subset who, since September and October, are frozen and so nervous," says Rooney, the managing director and head of Northeast investment business for private wealth management at J.P. Morgan in New York, which boasts that it serves 51% of the Forbes 400 list of the richest people in the United States.
Here are a few ways the wealthy are saving in the current recession -- and lessons average investors can learn from the rich.
Put safety first
Today, many wealthy people are thinking about safety over yield, Geczy says. The wealthy are scouring the Internet, looking for the best rates on certificates of deposit, money market accounts and other options backed by the Federal Deposit Insurance Corp., he says."They're still hugging close to fixed income, Treasury bills and fixed assets," he says.
The FDIC insures deposits only up to $250,000, so multiple savings accounts at solid institutions are key to liquid returns, says Tim Grizzle, a certified public accountant, the CEO of Georgia Logic, an Atlanta financial planner for high-net-worth individuals and the author of "Creating Wealth in a Turbulent Economy."
Rooney says that when shopping around for a bank, it's important to look into an institution's overall financial health. "Your biggest decision this year is where you're going to put your money," she says.
Choose the right bank
As long as you choose a bank that's FDIC-insured, there will be no risk to the first $250,000 you deposit. However, if a bank fails and is taken over by the FDIC, your rate of return could disappear, as there is no guarantee an acquiring bank will honor your previous institution's rate.Banks that offer a rate of return that's much higher than average may be strapped and at risk of failing, Geczy cautions.
On the other hand, competitive rates aren't necessarily a sign of trouble. For example, some online-only banks can offer great rates because they don't have the expenses of a brick-and-mortar bank, including rent and utility bills.
It takes a savvy researcher to discern the difference between a bank that's cash-starved and one that's an efficient operator. If a bank offers an unusually high return, ask questions, Rooney says.
"I wonder why it's above market -- why do they need deposits so desperately?" she says.
Before choosing a bank, investigate its Bankrate "Safe & Sound" rating. And remember that not all savings vehicles are alike -- some are federally insured, while others aren't.
Continued: Protect against inflation
