Are my bank deposits safe?

Most countries have a guarantee of protecting deposits

Depending on which country you live, there is an entity typically run by the government or the Central Bank that provides a guarantee or insurance for deposits upto a certain amount. So the most important thing for you to remember is that whatever happens, upto certain amount as an individual depositor, your money will be safe and secure and guaranteed by the government. I want to re-iterate: Nearly all banks in a country will be insured. However, it is important to check especially if you are banking with a small, unknown banking insitituion if they are insured. In the US, the FDIC has a tool called Bank Find for you to check if your institution is FDIC insured.

Below are the amounts up to which typically some different countries have guarantees.

What if I have money exceeding the above limits?

First off, if you have money exceeding the above limits in one account in one bank, then you need to consider de-risking your strategy because it is possible that you will lose that money in the event of a bank failure.

However, being very practical, governments have in the past a lot of times ensured all depositors for all of their money exceeding above coverages. That’s not a guarantee however and you can certainly not depend on that. It is in government’s interest to safeguard depositors because if depositors lose confidence in the banking system, then there will be an economic collapse. Therefore, ensuring the general public feels confidence in the banking system is very important for governments.

Having said the above, my recommendation if you have more cash than the above limits is to ensure you optimize your coverage. How do you do that? I will use the example of the US now. In the US, the FDIC insures $250,000 per account per bank per ownership category. So, the first thing is you can do is open multiple accounts in different banks. Second, if you open a joint account, you get to double the coverage – $500,000. An individual account is one ownership category, and a joint account is another ownership category. So, if you and your wife want to keep all your money in one bank – each of you can have deposits up to $250,000 and a joint account for $500,000 – basically ensuring $1M in deposits is insured.

Not all countries will have such generous rules – so its important to understand what is insured/guaranteed by each country.

Does this apply to CDs, Money Market accounts and Money Market Funds?

I will answer from the US perspective. Short answer – YES, CDs and Money Market Accounts are covered by FDIC. A Money Market Fund is not. See this link: https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/ for more details . But note that the limits by FDIC are by ownership category (single account, joint account) across these type of products.

For other countries, if you go to the websites of the different government insuring agencies, you will find details on what types of financial products are insured. Almost always, they will be bank deposits and equivalents like what we have in the US. The limits will obviously be different by country.

Concluding Comments

In the last blog post on ‘Why is cash considered king (or Queen)?’, I talked about the importance of cash. With prevailing interest rates (or whenever interest rates go up), there is a ton of interest and sense to park money in cash. As you go through that, this article was meant to help you understand how safe your money is.

Thank you for reading and I wish you luck on your financial well being journey!