THE MYTH ABOUT BILLIONAIRES AND A BILLION DOLLARS IN THE BANK ACCOUNT

Whenever the topic of billionaires are raised and discussed about, the generally accepted view often is that these individuals always possess a huge pile of cash usually in billions in their bank accounts. This idea is ignorantly shared amongst the populace thereby grooming financially unsavvy lots.

In this article we would take down this myth in favour of the real reason the ultra-rich are actually referred to as billionaires and how you can grow your wealth to reflect the billionaire status. So before we demystify this, let’s take a glimpse at what a bank account (savings/current) really is.

So indeed, a savings account is a form of a deposit account that bears interests on it for the holder albeit at a very modest rate at a bank or other financial institutions. These kinds of accounts are in theory good for keeping short-term cash or emergency funds which means the account possesses high liquidity potential relative to other kinds of savings instruments and investment vehicles. The major downside this type of account holds is that it places a restriction on the transactions to be performed through it, that is, a certain limitation to deposit and withdrawal. On the other hand, a purpose of a current account significantly distinguishes it from a savings account in that a current account offers none of the perks mentioned above. In other words, a current account is a deposit account that offers the luxury of carrying out transactions frequently without limitations. These kinds of accounts are therefore evidently suitable for business people and entrepreneurs who would at regular intervals daily perform transactions (deposit/withdrawal.)

Now we see first of that even if a billionaire is to hold a sizeable amount of his wealth in cash, it would be stored in a current account because of transactional ease. But is it wise to do so? Most billionaires do not think so.

Economically, with inflation hitting record highs in countries around the world with the US not left out, money stored in the bank or under your pillow systematically and gradually loses value and tends toward zero. You might argue that savings account pays interests on the money deposited but frankly the interest rate being relatively at the lowest it has ever being today cannot give you a decent profit on your ‘investment’. With inflation rate in Nigeria currently pegged at 15.63% as at the time of this writing and an annual savings interest rate of about 1.25% - 2% (given that you secured the best rate) it is little wonder why the top guns detest this approach.

So you ask, how do the ultra-rich store money and have it available to them whenever they need to get a faster jet or a rare De Beers diamond stone, or a 10-acre mansion in the Hamptons? It’s easy. They sell stocks they own, they liquidate part or all of their ETF (Exchange Traded Fund) investments, they trade off their crypto tokens, or sell off a piece of real estate in their portfolio just to name a few.

Granted. Dumping off a huge percentage of stocks or crypto tokens you own can be relatively difficult. This is true because of the ready inaccessibility of a buyer with such amount to part with in such a short period of asking. Not only could this pose a problem, the share price of such assets would likely plummet and render the value of your asset worth less than the value it was right before the asking. How then do the wealthy maneuver this obstacle?

They literally bank on their name to make it happen in a blink of an eye. I’ll explain. So being a billionaire comes with varied benefits and favours as you well know and as the Bible rightly says ‘to them who have more shall be added’. This ‘more’ comes sometimes in the form of what is called LINE OF CREDIT. Simply put, a line of credit is lifeline in form of a credit written by a financial institution, giving a certain individual (usually a high net worth) or corporation access to a certain amount of cash (usually huge) based on the underlying assets or net worth of the individual or corporation involved. So if Aliko Dangote, Nicky Oppenheimer, or Elon Musk decides today to purchase a mega yacht worth $700 million to earn the bragging rights over Chelsea FC owner Roman Abrahamovic or Amazon founder Jeff Bezos who recently purchased theirs worth $600 million and $500 million respectively, all they need to do is to easily secure a line of credit worth $700 million and make their purchase hassle-free. The financial institution writing this credit is not bothered because these individuals have assets worth many times over the amount required.

So as you can obviously understand, a billionaire is not a billionaire because he has a billion dollars in his bank account. A billionaire is a billionaire because he can do a billion things in a second without physically having the cash to do so.

I hope this piece has been informative enough to debunk previously held ideas about money in this regard. Look out for future articles or go over previous ones to stay insightful! 

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