Protecting Your Cash

With news of major banks failing for the first time since the financial crisis in 2008, it is important to understand the rules that protect your cash. If you have cash that is not protected, then it is important to take the necessary steps to rectify that situation.

Cash at all U.S. banks is insured by the FDIC. It is a $250,000 limit per account holder and per bank. So if you have $250,000 at Chase and another $250,000 at Wells Fargo, all $500,000 of your money is insured because it is at different banks.

If you and your spouse have $500,000 at one bank, your money is insured because the protection is $250,000 per account holder even if it resides at one bank. This also applies to trust accounts with multiple trustees.

If you do your banking at a credit union, essentially the same rules and limits apply. The only difference is that the coverage is provided by the National Credit Union Administration (NCUA) instead of the FDIC.

For cash at brokerages like Schwab or Fidelity, your cash is protected to the same extent as banks and credit unions by the SIPC. For your investments, those belong to you as a shareholder and not the financial institution where you hold them. If the broker were to fail, your investments would not be part of the firm’s bankruptcy or liquidation.

Part of what we do for our clients is help them manage their excess cash, especially when it’s more than should be held at a bank. We do this through the use of safe and liquid bonds and bond mutual funds. With these types of tools readily available, there is no reason to ever be in a situation where you have cash that is unprotected at a bank or other financial institution.

If you need help managing your cash, please contact us.