Banks Are Failing… Is Your Money Safe?
The recent failures of both Silicon Valley Bank and Signature Bank have led many Americans to be concerned. Concern is natural when something like this occurs. If something similar happens to your bank, how safe is your money? Additionally, this event has increased ever-present fears of a recession. Right off the bat, we’d like to assure you in part. Generally, money kept in a bank account is safe, even if a recession happens (And, again, it might.) However, this depends on certain factors. Such as your balance amount, and the specific type of account, which might not be completely protected. For example, Silicon Valley Bank likely had billions of dollars in uninsured deposits.
Fortunately, there are some things you can do to increase the safety of the money you have in the bank. In this post, we’ll share more important info, including tips on how to do this. We believe that financial stability and safety, no matter the state of the economy, is vital to have.
To start, it’s important that you understand the following. You see, your money is not physically in a bank when you make a deposit. As soon as the bank receives a deposit, most of that money is given away in the form of a loan. Typically, according to the Federal Reserve, capital requirement is around 10%. This means that 90% of the money “in” your account is actually somewhere else. However, as long as there isn’t a run on the bank, there won’t be any problems.
However, there have been times when a large number of people at once have lined up demanding their money back from a bank. This can lead to the bank failing, as they can’t fulfill all these requests.
How Often Do Bank Runs Happen?
Bank runs don’t necessarily signal economic instability. A few of them typically happen per year, according to the Federal Deposit Insurance Corporation (FDIC.) Granted, there weren’t any failures to FDIC-insured banks during 2021 or 2022. However, this streak has obviously broken. And it may get worse, considering banks going under is a common occurrence during a recession.
What If Your Bank Fails?
When a bank does collapse, the FDIC covers losses. Then, they hand everything over to a different institution. In fact, if your bank collapses, you might not even notice a change. However, that’s if it’s FDIC insured. And, not all financial institutions, or even all banks, are. Even then, the FDIC can run short. For example, if numerous banks fail at once, which happened during the last recession.
There are a few measures you can take to protect your savings from bank failures. It definitely pays to know more about your bank than just its name. Here are just a few ways that you can keep your money safe, even in the event of a bank failure.
What You Can Do
Firstly, bank at an FDIC-insured institution. Most banks are FDIC-insured, but as we said before, not all are. If your bank is FDIC-protected, bank deposits of up to $25,000 are insured. And, if you have more than that, you can still get additional coverage. This can be done by opening up a different account, either at a different bank or a different type of account at the same one.
If you have deposits resting in a non-FDIC-insured bank, this is putting you at risk in the event of a bank failure. You can check whether or not your bank is FDIC-insured by looking it up on the FDIC’s BankFind Suite Page.
Next, it’s important to keep tabs on your bank. Aside from knowing whether or not you’re FDIC-insured, you can keep up with news surrounding your bank to monitor how it’s doing. This way, you can be aware of any potential problems, and take steps to protect your money ahead of time.
Next, it’s important that you know the FDIC’s limits. Not only do they only cover deposits of up to $25,000, but they only cover your money in certain ways. The FDIC doesn’t cover losses due to theft, including fraud and identity theft. And, this is a problem, as this particular problem has been on the rise in recent years.
Additionally, the FDIC doesn’t protect you from losses if you invest directly in a bank’s stock, or any stock, for that matter. They also don’t insure the money in your account at your credit union, although the National Credit Union Share Insurance Fund does. And, they can’t help you if your safe deposit box gets broken into.
We Can Help
In conclusion, as we said before, it pays to know more about your bank than just its name. If your bank fails the same way Silicon Valley Bank and Signature Bank did, you’ll most likely be okay. However, it’s important that you do your research.
If financial stability is a big concern of yours, you wouldn’t be alone! With the possibility of a recession looming, many people are looking for help keeping the money they’ve worked hard to save protected. And that’s where Messina’s Wealth Management comes in. If you’re looking for more financial stability, get in touch with us, as we can potentially help with this. Our money management services might be of use to you. Additionally, there are alternative options for storing away some of your money in order to keep it safe for the long haul. If you want to learn more about these, call us. We’re always here to help!