FDIC

Your Money In Interesting Times

Have you ever heard of the old curse: “May you live in interesting times?” For the past ten years or so we’ve been obsessed with the Greatest Generation, a generation made famous by living through two World Wars and the Great Depression. What we loved about them, is that as the going got tough, they got tougher.

What we’re seeing now is hopefully not as bad as what they lived through, but we could still learn a lesson from them. This isn’t a great time for jobs, banks, investments, or mortgages. If you’ve been watching or listening to the news, you know that our country’s financial systems are in bad shape. Our government is working on saving the banks, but you’re probably wondering who’s going to save you? It’s not like the weather has been that great either in this La Nina year. So how do you keep your money and possessions safe in difficult times? By living carefully.

Banks

The Number 1 thing you must do is keep your hard-earned cash safe. You can do that by keeping your money in an FDIC insured bank. That means if the bank fails, a good portion, if not all, of your money will be refunded. For more information on this please go to my blog and read The FDIC: What You Need to Know.

Once your money is in an FDIC insured bank, then you need to make sure you would get a full refund if the bank fails. If you have over $100,000 in a bank, you need to talk to your banker. You may find that you need to move money into different accounts and maybe into multiple banks. Check out www.myFDICinsurance.gov for more information.

Home Disasters

If you were located in an area devastated by a hurricane, floods, or fire, and you had to evacuate your home, how would you access your money?

First, make sure that your income is direct deposited. It might be a while before you can get your paycheck by mail or pick it up at your company.

Second, make sure you have an ATM card. If you had to temporarily relocate to another area, you might not be able to cash your payroll check. You could possibly deposit it another bank, but taking money against it is something that not all banks will allow you to do if they don’t have a relationship with your employer themselves (or with you.) If you have an ATM card, there will be a machine somewhere that you can access. You might have to pay a fee if it’s not your bank, but at least you will be able to get cash for food, gas, and lodgings.

Mortgages

It’s going to be a lot harder to get a mortgage from now on. The best thing you can do for yourself if you need to refinance or want to get a mortgage is to protect your credit score. Read my article Fico Has Something to Say About You for more information on how a bad credit score can affect your chances to get a mortgage. Check your credit report 3 times per year, pay your bills on time and don’t over extend yourself.

Investments

I wouldn’t dream of advising you on investments. All investments are a gamble, with some bets beings safer than others. At this point, I’m not sure which investments are really the safest. We’ll have to wait and see.

I hope this helps you plan for interesting times. As always, the best thing you can do for yourself is plan ahead, take care of your credit, and choose your bank carefully.

The FDIC: What You Need to Know

Did you see the gentleman on the news a few weeks ago who had $236,000 on deposit with Indy Mac Bank? He almost lost more than half of his money even though his bank was insured by the FDIC. That’s because the FDIC only insures deposit holder funds for up to $100,000.

Lucky for him, the FDIC in Indy Mac’s case was paying an additional fifty cents on the dollar, so he got another $68,000 back. The bad news is that he lost $68,000. That’s a lot of money to lose.

If you want to protect your savings and deposits, the best way is to understand how the FDIC works and make it work to your advantage.

First make sure the bank you chose is FDIC insured. To verify that your bank is safe, call 877-275-3342. If your bank isn’t FDIC insured, move your accounts to a bank that is FDIC insured.

The FDIC insures each account holder up to $100,000. Take a look at these examples to see how to protect your money:

Jane Smith
Checking Account $25,000.00
Savings Account $50,000.00
CD $50,000.00
Total Amount at Bank: $125,000.00

* Jane is only insured up to $100,000.00. She would lose $25,000.00 if her bank failed.

Greg and Sally Jones
Mutual Checking Account $15,000.00
Greg’s Savings Account $75,000.00
Sally’s Saving Account $30,000.00
Total Amount at Bank: $120.000.00

* Greg and Sally are insured up to $200,000.00. They are two different account holders. If they had a mutual savings account instead of two separate accounts, they would lose $20,000.00

Here are some other things that you need to be aware of:

The FDIC insures $100,000 per account holder per bank, not per bank branch. Yes, some people have made that mistake. The branches aren’t separately owned. If you deposit money in the Springfield Bank – Centerville Branch and then open a new deposit account at the Springfield Bank – Mall Branch, that’s still the same bank, and the FDIC considers it to be all one pile of money. The same applies if you open one account at Springfield Bank – Online and one at a physical branch. If you have more than $100,000 to lose, use two or more separate banks.

If you have a small business that uses your personal social security number as the tax identification number (i.e. Mary Brown, D/B/A Mary Brown Personal Chef) then that balance is part of your $100,000.

If your bank is taken over by the FDIC, chances are that another bank will buy the accounts of the failed bank. When that happens, you have six months grace period under FDIC to reorganize your accounts if needed.

You work hard for your money, so keep it as safe as possible. Don’t lose money that you could have easily protected.

What is the FDIC?

What Happens Now?

With all the news about banks failing. and concerns about the accuracy of the FDIC Watch List (and its secrecy), you may be wondering how to protect your money? Banks are supposed to be the safest place to store your money, right?

These questions are only new to today’s younger generation. Your grandparents and great-grandparents remember when bank failures were all too common.

Following the stock market crash of 1929, thousands of banks failed. In fact, bank failures in the past led thousands of people to store their savings at home. People would take their extra cash and bury it in the back yard, stuff it behind walls, and inside of mattresses. Unfortunately, this led to a lot of lost and stolen cash (not to mention the cash destroyed and lost forever by house fires and floods).

The Federal Deposit Insurance Company (FDIC) was started in 1933 to help people trust banks again. With the FDIC in place, people could deposit their savings in the bank knowing that at least a portion of their savings would be returned if their bank failed. That’s right, the FDIC is an insurance company for banks! Just like you might be reimbursed a portion of your car’s value in the event of a crash, the FDIC will reimburse a portion of your cash if your bank fails.

Next week, we’ll talk about how to find out if your bank is FDIC insured, how much money they will reimburse you, and how you can make the FDIC work to your advantage.