Is Your Money Safe At Your Bank?

Keeping your money in a safe place would give you at ease without a doubt. Have you ever wondered how safe it is to leave your money at a bank, which most people do? How about Bank of America, Chase, Fells Fargo, CitiBank and etc? What if the economy face to the Great Recession like 2008-2009? A great depression happens time to time every once a while according to the history. It has been happening since 1934 and it will keep happening and no one cannot stop from happening in the future. And Once it did, lots of people would lose money. Technically a small percentage of people would still make money instead, but a majority would lose. What is the difference between those people? knowledge.

Imagine if you lose you money when you are about to retire. It is painful, isn't it? I don't want to be negative, because I am positive person in general, although knowledge and decision I make have to be reasonable and realistic. Let's look into how banks operate.

If you visit any bank, you would probably see a sticker or place on bank counter window just like this.

Yes, this is FDIC. In general When a bank issue Certificate of Deposit (CDs) for your savings, your money will be protected by FDIC up to $100,000 ($250,000 for deposit retirement accounts) per depositor, technically under one social security. FDIC will guarantee your principal once a bank becomes insolvent. In its own words, “The FDIC is an independent agency of the United States government that protects you against the loss of your deposits. It sounds great, right? The mistake people make is that people think FDIC is the government, the government would help you to guarantee your money. Wrong!! In fact, FDIC stands for Federal Deposit Insurance Corporation. It is not the government, it is a corporation. Basically, an insurance corporation insures banks in case they become insolvent.

Do you see the third paragraph, it says 

In 1991, Congress gave the FDIC until 2006 to rebuild the fund so that it holds $1.25 for every $100 of deposits insured. 

The Fund now covers only 6 Cents for every $100 of deposits.

This is the significant change for your money to be insured. How safe is your money? Nowadays,  most consumers are more concerned about the return their money rather than the return on their money.

There are some reasons for consumers to use banks, accessibility and convenience and all that. However, keeping your money in insurance corporation is also one of the options to increase the safety, yet choosing the most stable insurance corporations would be more certain to be protected. Another tip about insurance corporation products is that some of their financial products can give you more than 5-10 times of interest rate that CDs cannot provide. Please be patient to see what kind of financial products they have, I would like to cover that at the different blog.

<Recommended Book>

Inside the FDIC: Thirty Years of Bank Failures, Bailouts, and Regulatory Battles