How to diversify your money when banks fail (2024)

FAQs

How to diversify your money when banks fail? ›

By maintaining multiple accounts across several FDIC-insured banks — or at least multiple accounts at one FDIC-insured bank — you can protect your money in the event of a bank failure. Two wise ways to do this are with high-yield savings and certificate of deposit (CD) accounts.

If you have a brokerage account with cash you need within the next 36 months, ask your financial adviser to invest in a Treasury-only money market or bond fund. You might also consider buying CDs from different banks up to FDIC limits within a brokerage account.

In most cases, the FDIC will try to find another banking institution to acquire the failed bank. If that happens, customers' accounts will simply transfer over to the new bank. You will get information about the transition, and you will likely get new debit cards and checks (if applicable).

The standard FDIC deposit insurance coverage limit is $250,000 per depositor, per FDIC bank, per ownership category. This means each depositor is insured to at least $250,000 at an FDIC-insured bank.

Two wise ways to do this are with high-yield savings and certificate of deposit (CD) accounts. Both of these products offer higher interest rates than traditional savings accounts, so your money grows faster the longer you keep it in the account.

Money market accounts are worth considering as well. They're FDIC-insured, and combine features of checking and savings accounts. U.S. government securities—such as Treasury notes, bills, and bonds—have historically been considered extremely safe because the U.S. government has never defaulted on its debt.

Ensure Your Bank Is Insured

If a bank or credit union collapses, each depositor is covered for up to $250,000. If your bank or credit union isn't FDIC- or NCUA-insured, however, you won't have that guarantee, so make sure your funds are at an institution covered by deposit insurance.

If you ensure that the balance on your account is always below the sums protected by the Government guarantee, then you will get all your money back if your bank fails.

The banks of greatest concern are Flagstar Bank and Zion Bancorporation, according to the screener. Flagstar Bank reported $113 billion in assets with a total CRE of $51 billion. The bank, however, only had $9.3 billion in total equity, making its total CRE exposure 553% of its total equity.

What will happen to my money if my bank collapses? ›

Nearly all banks in the United States are FDIC-insured, which means even if a bank were to fail, your money is protected. The FDIC insures each bank account up to $250,000 per depositor per ownership category, such as single owner or joint owner.

Standard CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000, so they cannot lose money. However, some CDs that are not FDIC-insured may carry greater risk, and there may be risks that come from rising inflation or interest rates.

Republic First Bank reported unrealized securities losses in excess of its equity as early as June 2022. State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year.

Those include high-yield savings accounts, money-market funds, certificates of deposit and short-term Treasurys. All of those are boasting interest rates around 3% to 5%. These accounts typically pay interest rates that adjust with those set by the Federal Reserve—or around 3% to 4% right now.

Millionaires can insure their money by depositing funds in FDIC-insured accounts, NCUA-insured accounts, through IntraFi Network Deposits, or through cash management accounts. They may also allocate some of their cash to low-risk investments, such as Treasury securities or government bonds.

A bank failure is unlikely to impact your retirement funds if they are held in separate accounts and managed by a reputable custodian or investment firm. If a prominent bank were to collapse, you might see lower returns on some of your investments for a time following the event.

To avoid a financial hit if your bank fails, stick to insured institutions and account types, stay under account balance limits and use different ownership arrangements. A financial advisor can help you build a financial plan that accounts for your savings. Speak with an advisor who can help today.

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you'll get your money back. Nearly all banks are FDIC insured.

A money market account can be a safe place to park extra cash and earn a higher yield than from a traditional savings account. Money market accounts are like savings accounts, but they often pay more interest and may offer a limited number of checks and debit card transactions per month.