This weekend made me think of a scene form Mary Poppins when there was a run a British bank.  I love that movie.  I especially like the part where the dad sings about how a British bank is run with precision.  My wife doesn’t like it quite as much when I sing about how an American advisory firm is run with precision.  But I’m not quite as good of a singer.

Let’s start by saying that FDIC insurance is the thing that makes a bank deposit about as close to total safety as a deposit can be.  The reason is that it is backed by the federal government.  It insures up to $250,000 per depositor per bank.  So, if you are concerned about a non-insured deposit, you can move to another bank with any excess money.  If the federal government is not able to back an FDIC insured deposit, then quite frankly, we have much bigger problems than your bank deposits. 

So that brings us to the next phase of this article.  Yes, if you have money below $250,000, you are insured by the federal government.  However, what about the money that is above the $250,000 mark?  First off, you can use multiple banks.   But if you are worth several million dollars, that can get confusing and be a pain in the butt.  Personally, I believe that most banks are safe.  If you are at a stage where you want multiple bank accounts for the FDIC reason, then you will have a couple of choices. 

The first choice is to trust the bank that you are currently deposited.  A vast majority of all bank deposits are uninsured.  If you have trust in your bank for the non-insured deposits, then your issue is solved right there.  Of course if you have multiple bank accounts at multiple banks, then you are spreading out risk, but if ultimately you have some uninsured deposits (at one bank or multiple banks), then you have to allow for some type of trust somewhere.

The next choice is to use a credit union in addition to a bank.  Credit unions have a similar source of government protection.  They are insured by the National Credit Union Share Insurance Fund (NCUSIF) up to $250,000.  It may be a bit of a hassle to get into a credit union, but most of them are eager to accommodate you to get your business.  If you’ve never worked with a credit union before, make sure you research what they do and how they are run before you make any deposits.

Lastly, you can keep your excess capital invested.  That can be done in a brokerage account, real estate, precious metal, collectibles, and the list goes on forever.  None of those things provide FDIC insurance, or guarantees, but they do offer a greater potential return on your investment.

If you have any questions please email me at mtosaw@rcmfs.com.