How to Keep Your Savings Safe

Bankruptcy, Investing, Saving

March 30, 2023

The failure of Silicon Valley Bank a few weeks ago has created plenty of anxiety. I have heard from so many of you who are worried about the safety of your savings at banks and credit unions.

Listen up: If you have been following my advice you do not need to worry.

As long as your bank or credit union is federally insured—advice I have been giving forever!—your savings are safe.

Even in the very rare event your bank or credit union were to fail, federal insurance provides $250,000 of protection per person per institution for each of certain types of accounts.

If you have less than $250,000 on deposit at a single bank or credit union that is federally insured you are all set. Nothing to be worried about. And as I will explain in a moment, you can have even more than $250,000 of protection if you spread your money across different types of accounts, as well as if you add beneficiaries to the accounts you currently have.

But I want to be clear: opening accounts at different branches of the same bank or credit union does not increase your protection.

Still nervous? Okay, you really need to listen to my recent Women & Money podcast episode where I had a very special guest: Sheila Bair, the former head of the FDIC, which is the government agency that provides insurance for bank accounts. It was so great to hear her explain how bank (and credit union) insurance works, and how to keep your money safe.

Confirm your savings are federally insured.

To confirm your bank is insured, look for the words “member FDIC” on a bank statement, or scroll down to the bottom of the page once you log on online. FDIC stands for the Federal Deposit Insurance Corporation.

If you have deposits at a credit union, you want to see the words “NCUA insured.” NCUA stands for National Credit Union Administration. This is the government agency that insures credit union deposits.

The $250,000 applies across eight “categories” of accounts.

You may have a variety of different types of accounts that fall under one of eight different categories. For each category, you have at least $250,000 of insurance.

Ownership Categories

  • Individual Deposit Accounts (checking, saving, CDs, etc.)
  • Certain Retirement Accounts, such as IRAs
  • Joint Accounts
  • Revocable Trust Accounts
  • Irrevocable Trust Accounts
  • Employee Benefit Plan Accounts
  • Corporation/Partnership/Unincorporated Association Accounts
  • Government Accounts

What’s protected…and what’s not insured!

Okay, this is super important, so please read this carefully.

Only certain types of bank and credit union accounts qualify for federal insurance. Just because you have an account at a bank or credit union does not guarantee that the money in that account is backed by federal insurance.

What’s covered: Deposit accounts.

A deposit account is a checking account, a savings account, a certificate of deposit, or a money market deposit account (MMDA). Federal insurance coverage is for the sum of all of these accounts in each of the categories named above at a single bank or credit union. You don’t get $250,000 for a checking account in just your name and another $250,000 for your savings account, etc.

Here's an example of how it can work. If you have a checking and savings account and a CD in just your name, the combined value of those three accounts is insured up to the initial $250,000.

If you also have a joint account at the same bank or credit union and you both are listed as 50% owners, you have an additional $250,000 of protection for that joint account, and your co-owner also has a separate $250,000 of protection for their 50% share of the joint account.

If you have a trust account, that is eligible for another $250,000 of coverage.

If you have an IRA account at a bank or credit union and it is invested in a certificate of deposit or a money market deposit account, it qualifies for its own $250,000 in coverage. I want to be very clear about IRA insurance coverage: federal protection only applies if the IRA account owns a savings-type vehicle: cash or something cash-like, such as a CD or money market deposit account. An IRA account that owns investments—stocks, bonds, mutual funds—does not qualify.

What’s not covered: Investments bought through your bank or credit union.

If you own any investments, such as stocks, bonds, mutual funds, or annuities that you purchased through your bank, those are not covered by federal insurance. Just because you buy something through your bank or credit union does not mean it qualifies for FDIC or NCUA insurance coverage.

Adding beneficiaries can increase your insurance protection.

While each category of bank and credit union accounts qualify for an initial $250,000 of coverage, if you name beneficiaries to the account your coverage increases.

You can have a maximum of five beneficiaries per account, and this is true no matter what category an account falls under. That means if you were to name five beneficiaries to one account type it would currently have a maximum of $1.25 million in federal insurance protection, assuming the account owns “deposits” that qualify for protection.

Time for another example to make this clear:

If you have a savings account in your name only and no beneficiary is named, the account is insured for up to $250,000.

  • If you name one beneficiary, the insurance limit remains at $250,000.
  • If you name two beneficiaries, the account is now insured for a total of $500,000 ($250,000 per beneficiary).
  • If you name three beneficiaries, now you have $750,000 of insurance (again: $250,000 per beneficiary).
  • If you name four beneficiaries, you now have $1,000,000 of insurance.
  • If you name a maximum of five beneficiaries, you will have $1.25 million of federal insurance protection.

Please know if you have a revocable or irrevocable trust or custodial account at a bank or credit union, each beneficiary of that account—up to a max of five (and assuming it does not hold investments such as stocks and bonds)—is eligible for $250,000 of protection.

If you do your savings at a credit union, you can use this free online tool to check your level of NCUA insurance based on the types of accounts, and beneficiary designations. The FDIC also has a calculator you can use too.

And be sure you have your spot saved for my free webinar event happening today! I will be teaching you even more important money moves you should be making right now – you don’t want to miss it!

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