With big banks, like Silicon Valley Bank, going out of business, where can you keep your money that’s safe and easy to use? Could it even give you a higher and safer return than the bank?

In this episode, Chris Miles shares where he’s keeping his own money safe, and gives some stern warnings about the economy that you need to hear.

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LEARN MORE ABOUT: Bank Failures

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How To Protect Yourself Against Bank Failures

Bank failures can be a devastating experience for account holders. Not only can it result in the loss of deposited funds, but it can also create a significant inconvenience and uncertainty. While instances of bank failures are relatively rare, it is crucial for individuals to be proactive and take necessary precautions to protect themselves financially. Here are some essential steps to ensure your funds are safeguarded against bank failures.

1. Choose a reputable and financially stable bank: Before opening an account, thoroughly research the bank’s financial health and stability. Look for banks that are well-established, have a strong reputation, and are backed by government insurance programs. Institutions with a long track record of stability are generally safer options.

2. Verify deposit insurance coverage: Ensure that your bank is a member of a deposit insurance program such as the Federal Deposit Insurance Corporation (FDIC) in the United States, which protects depositors against the loss of their insured deposits in the event of a bank failure. Check the coverage limits for your account type to ensure your funds are adequately protected. In the US, for instance, FDIC covers up to $250,000 per depositor, per bank, for each account ownership category.

3. Maintain accounts within the insurance limit: To safeguard your deposits, ensure that the total funds in any single institution do not exceed the insurance coverage. If you have a substantial amount of money, consider dividing it between different banks to fully utilize the insurance protection available. By spreading your deposits across multiple banks, you reduce the risk of exceeding the insurance limits and losing any uninsured funds.

4. Diversify your accounts: Instead of putting all your funds in a single type of account, diversify your holdings across different account types. A variety of account options, such as savings accounts, money market accounts, certificates of deposit (CDs), and retirement accounts, can provide added protection. Different types of accounts may have separate insurance limits, thereby increasing the coverage available to you.

5. Stay informed: Keep up-to-date with the financial health of your bank. Monitor any news or reports about the institution, including its stability, performance, and changes in ownership or management. Regularly review your account statements, paying attention to any unusual or unauthorized transactions. Staying informed helps detect potential warning signs of financial distress within your bank and allows you to make appropriate decisions ahead of time.

6. Be cautious with uninsured deposits: Many banks offer additional investment products, such as brokerage accounts, mutual funds, or annuities. These products are not covered by deposit insurance programs. While they may offer potentially higher returns, be aware that they also carry more risk. Consider thoroughly understanding these investments and consult a financial advisor to determine if they align with your risk tolerance and financial goals.

7. Explore alternatives: If you are concerned about the stability of your bank or banking system, consider exploring alternatives such as credit unions or online banks. Credit unions often have similar deposit insurance programs, while online banks tend to have lower overhead costs and, therefore, can offer competitive interest rates and services.

While it is unlikely for a bank failure to occur, being prepared and taking proactive steps to protect your finances can save you from potential losses and stress. By choosing a stable bank, diversifying your accounts, and staying informed, you can ensure the safety of your deposits should an unfortunate event occur. Remember, financial responsibility and due diligence are key to safeguarding yourself against bank failures.