Money Management

There’s a very good reason most people don’t need to worry about bank collapses. 

If you have money in the bank, as most people do, then the news in recent weeks of several major banks failing may have you feeling pretty nervous right now.

The good news is, this isn’t something for you to be concerned about. In fact, as finance expert Dave Ramsey explained, the vast majority of people have no reason at all to worry about losing their money if a bank fails. Here’s why.

Dave Ramsey says your money is safe in the bank

Ramsey provided a simple explanation for why bank failures are not likely to affect most people financially in any way.

“If the economy suddenly tanks or some banks fail, there’s absolutely no reason to head to your local bank branch and withdraw a suitcase full of cash,” Ramsey said. “Your money is much safer in a bank than it would be stuffed under your mattress (or anywhere else), and that’s because bank deposits up to $250,000 are insured by the FDIC.”

The FDIC, or Federal Deposit Insurance Corporation, was created by the federal government to provide insurance for bank deposits. Banks pay premiums and the FDIC basically ensures people don’t lose money — as long as their deposits are insured.

Is your money protected by the FDIC?

Ramsey is absolutely right that the FDIC protects most people from losses in the event their bank collapses. But you need to make sure you choose a bank or financial institution that offers FDIC protection. The vast majority of institutions do, but if you want to be sure yours is under the FDIC umbrella, you can check for an FDIC sign at your bank branch or use the BankFind tool on the FDIC website.

You should also know how FDIC insurance works. Specifically, up to $250,000 per depositor and per account type is protected at each bank. So if you have less than $250,000 in a checking account or savings account, you can rest assured that you will get your money back if something happens to your bank. The FDIC will make sure of that.

If you have more than $250,000, however, you will need to do a little bit more in order to make certain you don’t have money at risk. You can use multiple different banks and split your money up, putting up to $250,000 in your account at each financial institution. Or you can open several kinds of bank accounts with one institution, since the $250,000 insured limit is per account type and per depositor.

Ultimately, this isn’t a problem that many people have to worry about. If you’re lucky enough to have more than $250,000 in the bank, you should easily be able to find a workaround to make sure that money is fully covered by insurance. Or if you have really substantial sums for yourself or your business, work with financial professionals to find a solution that works for you.

So, don’t be afraid to keep up your banking relationships, despite these recent collapses, as long as you check your account has that all-important FDIC protection in place.

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It’s a question on a lot of people’s minds these days. 

At this point, it would be more than fair to say that 2023 has been a tough year for the banking sector. So far, two major banks — Silicon Valley Bank and Signature Bank — have collapsed. And in late March, UBS agreed to buy its rival Credit Suisse so as to avert a full-fledged banking and financial crisis.

Consumers are largely being told not to worry about these recents events, and are being reassured that this is not, in fact, a repeat of 2008, when a massive financial crisis spurred a painful and prolonged recession. But in a recent letter to shareholders, JPMorgan CEO Jamie Dimon warned that the impact of these recent bank failures could impact the economy for years to come.

In fact, Dimon expressly said that these failures “were not good for banks of any size.” And that’s an unsettling thing to contemplate.

If the recent banking industry meltdown has left you worried about your money, the good news is that you may have more protection than expected. And there’s an easy way to help ensure that you won’t end up losing money if the banking crisis continues.

Your money is most likely safe already

Most major banks these days are FDIC insured, and many smaller ones fall into this category, too. As long as you have money at an FDIC-insured bank, you can rest assured that your principal is protected as long as it doesn’t exceed $250,000.

What this means is that if you have $250,000 in your savings account and your bank fails, you won’t be out so much as a penny. And since most people aren’t sitting on more than $250,000 in savings, the typical U.S. consumer at an FDIC-insured bank shouldn’t have to worry.

What if you have a lot of money in savings?

It may be that you’re in the process of trying to do something like buy a home that requires you to keep a lot of money in cash at the bank. If you have more than $250,000 in savings, there are a few steps you can take to protect it, since that’s beyond the FDIC insurance limit.

For one thing, you can split your deposits between several banks. FDIC insurance will protect up to $250,000 in cash per bank, so if you have $400,000 in savings, you may want to put $200,000 in one bank and your remaining $200,000 in another.

A second option you can look at is adding a joint depositor on your account, like a spouse. If you do that, your FDIC insurance limit at a single bank will double, protecting up to $500,000 in cash deposits.

It’s natural to worry about your money when you keep reading about bank failures. But FDIC insurance was created to protect consumers from situations like these. So there’s really no need to lose sleep over the idea of the money you’ve worked so hard to save disappearing in a bank collapse.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Find out what safety nets are in place to protect your investments. 

With all the uncertainty that’s been swirling around the banking industry recently, you may have wondered what would happen if your brokerage fails. Most importantly, would your assets be safe?

Banks may house our checking and savings accounts, but brokerages are home to our longer-term investments, including our 401(k)s and retirement funds. The idea of that money disappearing is at best unnerving and at worst, downright scary. But if you’re losing sleep over it, know that there are a lot of safeguards in place to protect your funds.

The law demands brokerages protect your money

Let’s start by talking about the laws that should stop your assets getting pulled into a brokerage collapse. Following a spate of brokerage failures and lost consumer funds, in 1970, Congress passed the Securities Investor Protection Act (SIPA) in an attempt to restore confidence. Years later, the Dodd-Frank Wall Street Reform and Consumer Protection Act strengthened some of those protections.

One important rule requires brokerage firms to keep customer assets in a separate account. Legally, they are not allowed to touch your investments. So, if your brokerage is in trouble because it made some bad deals, it can’t dip into your retirement savings or other investment accounts to try to dig its way out. Check out our beginners guide to brokerages for more information on how they work.

Another directive means brokerages are required to have enough funds on hand to cover all their obligations. In other words if your brokerage fails, it is supposed to have enough liquid capital to make people whole.

FINRA and the SEC — the Financial Industry Regulatory Authority and the Securities and Exchange Commission — are responsible for ensuring brokerages toe the line. There have been times when those firms have not followed the rules. But broadly speaking, those regulations go a long way to keeping your investments safe.

There’s another important safety net in the shape of the Securities Investor Protection Corporation (SIPC), which was created as a result of the SIPA. It won’t help if your investments nose dive in value, but it will help if your brokerage goes bust.

How SIPC works

There’s a lot of similarities between SIPC insurance for brokerages and FDIC insurance for banks — both cover consumers up to certain thresholds if their financial institution fails. Like the FDIC, the SIPC gets involved when a brokerage is in trouble and its job is to protect your money. The SIPC says that 99% of eligible customers get their money back.

According to its site, the SIPC’s first priority is to try to transfer customer accounts (and assets) to a different brokerage. This happened when Lehman Brothers failed in 2008. The SIPC says it transferred over 110,000 customers’ funds, worth over $92 billion within weeks. A 14-year liquidation process followed for other accounts, particularly institutional ones.

This isn’t to say that the financial crisis that followed Lehman’s collapse didn’t cost investors across the board. It did. It took a long time for the stock market to recover from the dramatic drop in value. But while the value of Lehman’s U.S. customers’ portfolios may have taken a hit — like those of many other investors — a study by Liberty Street Economics showed many of them were able to access their portfolios relatively quickly after they’d been transferred.

If the SIPC can’t move your account to another firm, it will move to liquidation. This is where things can get a bit more complicated. The short version is that the corporation will try to either return your assets to you or use the SIPC fund to cover your losses. It’s worth knowing that the SIPC’s priority is to preserve your portfolio and give you securities rather than their cash value. So if you own 50 stocks of a certain company, you’d get those stocks back even if they’d decreased in the meantime.

Steps you can take to protect your assets

Unfortunately, history shows us that sometimes brokerages do fail, even if it’s a rare occurrence. One important step to take is to make sure your brokerage account is covered by SIPC insurance. If you have more than $500,000 (the SIPC threshold), look at ways to cover any excess. This might include opening a different type of account, or finding out if your broker offers excess SIPC protection.

Another useful move is to maintain your own records of what’s in your brokerage account. If the worst happens and your firm goes belly up, you might not be able to access your statements. If it turns out that the firm was not maintaining its records, you may need your documents to prove what you own.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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There are a lot of opportunities to save if you know where to look. 

April is probably one of the last months that comes to mind when you think of the best times to find shopping deals. But the changing of the seasons can bring about some great savings opportunities for those who know where to look. Here are eight common items you can buy for a steal this April.

1. Lawn care and gardening supplies

It might be a little early to start thinking about planting the garden or mowing the lawn. But if you’re in the market for new lawn care equipment, you might be able to find some good deals right now. Some manufacturers offer pre-season sales that allow you to get these items at lower prices than you could in the middle of summer.

Discounted items to look for include lawn mowers, string trimmers, and even leaf blowers. You may also be able to score savings on gardening implements.

2. Cleaning supplies

Spring is when a lot of people do a deep clean of their homes, and so a lot of manufacturers discount their stock in order to tempt shoppers into buying. Look for savings on carpet cleaners and vacuums right now.

3. Grills

Now is actually the smartest time to buy grills if you plan to host any barbecues this summer. Stores often discount last year’s models now, so they can clear floor space for the new models that come in as we get closer to summer.

4. Candy

Easter falls on April 9 this year, and you’ve probably already seen the store shelves filled with candy. But inevitably, some of that will still be there come April 10, and that’s when you’ll see stores mark it down so they can get rid of it. If you’ve got a sweet tooth, that’s the best time to replenish your stock of treats.

5. Spring clothing

Some parts of the country might still be in the grip of winter, but many retailers are already looking toward summer. And once again, they need shelf space to fit all the new summer fashions coming in. So typically, toward the end of spring, you’ll see spring items, like light coats, drop in price as stores try to get rid of them to make room.

6. Cookware

Cookware often goes on sale in April because wedding and graduation seasons are just around the corner. Newlyweds and students striking out on their own for the first time often need new dishes and cooking utensils, and they make great gifts. Shopping for these items right now could help you cross a few things off your to-do list and save you a few bucks in the process.

7. Bike helmets and athletic wear

Now that winter is finally fading, a lot of people are looking forward to getting back outside. So retailers often run sales on items geared toward outdoor activities. This includes bike helmets, as well as athletic shoes and other apparel.

8. Eco-friendly items

Earth Day is April 22 and some retailers discount eco-friendly or energy-efficient products around this time. This might include environmentally friendly cleaning products or even new windows that could help reduce heat loss in your home.

But you may not want to drain your bank account for new large appliances right now. A lot of these go on sale around Memorial Day next month, and you’ll probably find better savings then.

This isn’t an exhaustive list of sale items to look for in April, but it should get you thinking about what other kinds of products might be discounted now or in the near future. And if you’re in the market for something that’s not yet on sale, consider waiting and saving up for it. Different times of the year bring different sales, and it’s possible the item you have your eye on could drop in price later.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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