With all the news about banks failing. and concerns about the accuracy of the FDIC Watch List (and its secrecy), you may be wondering how to protect your money? Banks are supposed to be the safest place to store your money, right?
These questions are only new to today’s younger generation. Your grandparents and great-grandparents remember when bank failures were all too common.
Following the stock market crash of 1929, thousands of banks failed. In fact, bank failures in the past led thousands of people to store their savings at home. People would take their extra cash and bury it in the back yard, stuff it behind walls, and inside of mattresses. Unfortunately, this led to a lot of lost and stolen cash (not to mention the cash destroyed and lost forever by house fires and floods).
The Federal Deposit Insurance Company (FDIC) was started in 1933 to help people trust banks again. With the FDIC in place, people could deposit their savings in the bank knowing that at least a portion of their savings would be returned if their bank failed. That’s right, the FDIC is an insurance company for banks! Just like you might be reimbursed a portion of your car’s value in the event of a crash, the FDIC will reimburse a portion of your cash if your bank fails.
Next week, we’ll talk about how to find out if your bank is FDIC insured, how much money they will reimburse you, and how you can make the FDIC work to your advantage.