Here is the next installment in our the Reader’s Questions Series which highlight questions emailed to me by you, the readers of Money Q&A. Be sure to find out at the end of this article how you can receive a free copy of Dave Ramsey’s book, The Total Money Makeover if your money question is chosen to be featured on next week’s blog post. If you’re not familiar with Dave Ramsey’s book, you should run right out and get it. It is one of my top ten best personal finance books that everyone should read. Now….on to our reader’s question. A reader recently wrote in with the following question about the health and safety of his bank and whether or not he should pull money out.
Is my money safe in the bank or should I be worried?
Like the scene straight out of “It’s A Wonderful Life”, people are nervous about the money that they have in the bank when the economy continues to struggle and the markets are stumbling. The money you deposit in the bank will be safe assuming that your bank is insured by the Federal Deposit Insurance Corporation (FDIC). Up to $250,000 per account is insured by the FDIC should your bank go under.
What Is The FDIC
The Federal Deposit Insurance Corporation (FDIC) was founded during the Great Depression to keep people from making a run on bank deposits. The FDIC was created in 1933 in response to the thousands of bank failures that occurred during the Great Depression. The insurance protects depositors against the loss of their funds if a bank fails. FDIC insurance preserves and promotes the public’s confidence in the country’s financial system by insuring deposits in banks and other institutions. The insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, there has never been a lost any FDIC insured funds.
Double Check Your Bank Is A Member Of FDIC
You should ask your bank, check their website, or even look for the sticker on the door ensuring that it is a member of the FDIC before you open your account with that bank. Just like your car insurance, FDIC insurance is funded by premiums paid by the nation’s banks based on the amount of deposits that must be insured. Currently, the FDIC insures more than $7 trillion worth of deposits in the United States. Virtually every bank and thrift in the country is insured by the FDIC.
What About Credit Unions?
Your credit union is protected exactly like your bank deposits but only by a different institution. The National Credit Union Share Insurance Fund (NCUSIF) is a monetary fund created by Congress in 1970 to insure credit union deposits for the credit unions that joined the fund. Deposits of those credit unions are federally insured up to a limit of $250,000 per individual depositor. Credit unions must maintain 1% of all their deposits in the NCUSIF.
As you can see, as long as you stay under the FDIC and NCUSIF’s specified limits of $250,000 per account, your money is backed by the full faith and credit of the United States government. There is no reason to worry about your money not being in the bank at the end of the day no matter how crazy the economy gets.
Past Readers’ Questions:
- Is It Better To Save For Closing Costs Or Pay Down Loan?
- Is A $1,000 Emergency Fund Enough To Start?
- How To Prioritize Which Bills To Pay First
- Should You Put Your Emergency Fund In Mutual Funds?
- How Do You Start Saving If You Live Paycheck To Paycheck?
- How To Find A Payment Plan Without Cutting Necessities
- Is My Money Save In A Bank?
- What To Invest In After The Company Match
Do you have a money question that you would like to ask? Email me your money, investing, retirement, savings, or other question to Questions[at]MoneyQandA.com. If I pick your question for the next article in the series, I’ll send you a free copy of Dave Ramsey’s book, The Total Money Makeover, or you can pick from any of these other free books instead.