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Protecting yourself from bank failure during tough economic times: Feature Article

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Many people are concerned now about what is going to happen with the economy. There are many reasons why people are concerned and some believe that all of those reasons are justified. Money is very important in life and is necessary to help us get through the day all the time. Banks are certainly something that is out of the control of most people. Here is some more information about things you can do to protect yourself in the case of a bank failure. Banks are very important for the economy and people and businesses rely on them to loan out money so that they can do the things they need to do from day to day. When you are choosing a bank you need to know what is covered and what is not. Knowing what you're up against in tough economic times is one of the most valuable things that you can have at your disposal. Understanding how your money is protected and what types of accounts are insured by the government and what that means for you is another thing this is very good to understand.

Know what's covered/protected from bank failure

One of the first things you need to be sure of when you are deciding to put your money in a bank is to research them and make sure that all of the money you choose to put in accounts there will be safe and protected. The FDIC covers different amounts of money depending on who is opening the account and what type of account it is. Single accounts are accounts that are held by only one person and they are covered for up to $100,000 while joint accounts are for multiple people and are insured for $100,000 per account holder. Each of the holders in a joint account has equal rights to withdraw funds from the account, so it may not be wise to have an account with many people especially if you don't explicitly trust them. Retirement accounts are another category of account that is covered but the amounts are different. Retirement accounts have a higher amount that is insured and it is $250,000 for each person at each bank. This amount includes accounts such as IRAs, SEPs, Keogh plans and self directed 401k plans. If a person has an account at a bank and has deemed it for retirement purposes this still does not mean that it is covered at the $250,000 amount. For example, if someone is keeping their money in a CD at their bank, they may assume that it is covered at $250,000 but it is only covered at $100,000 no matter what they intent for the money is. The insurers and FDIC aren't concerned about what your plans are for the money or why you save in a particular way but only what type of account it is. There are also some other ownership categories that people should be aware of even though they will never own or have one. Some examples are revocable trust accounts, irrevocable trust accounts, employee benefit accounts and even some types of business accounts. You should keep in mind that even if you do exceed the insurance amounts this doesn't necessarily mean that you will lose all of the money that isn't insured above this amount. There are some circumstances that the FDIC considers to be particularly exceptional and sometimes they will insure more than the standard amounts.





Helpful Resources:

1. Protection for Possible Bank Failure
For some, the solution to protecting themselves from possible bank failures during tough economic times is to avoid banking institutions all together and take the safety of their money into their own hands.

2. Money Safety
If you are worried about the safety of your money, this article can help in providing a number of different suggestions for what can be done today to lower your risk associated with bank failure.

3. Protection From Bank Failure
Protecting yourself from bank failure during tough economic times begins with first obtaining an understanding of what exactly you stand to loose if there is a bank failure and what will remain safe.

4. Manage Money Wisely
Families and individuals can definitely survive and even thrive during tough economic times by simply having an understanding of how to manage money wisely. Follow this link to read more basic money management tips.

5. Where Your Money Goes
Click here to read an article that may help you to better understand where your money goes and what types of risks you are taking if there is a looming bank failure threat to your money.

6. GE Risk Protection
This article uses the company GE as an example as they explain what types of risks that you should protect your money from. Also explained are what types of financial pitfalls are possible even if there is no bank failure.

7. Bank Failure
The possibility of bank failure is something to worry about, but recently the argument is being made that there are cases where banks that are receiving assistance to avoid failure may actually be just as risky or at least difficult to do business with.

8. 11 Things to Protect Yourself from the Bad Economy
This web site offers 11 suggestions for things that you should do to protect yourself from a bad economy, including the negative consequences of possible bank failure and your money.

9. Best Investment are During Tough Times
There are actually a good number of people who feel like the best investments that can be made during these tough economic times are investments in precious metals and more specifically, gold.

10. Protection From Bank Failure
Protecting yourself from bank failure is important but perhaps more important is protecting the money that you have in those banks from diminishing in value. This article offers some suggestions for how you can maintain the value of your money.





Know what's not covered/protected from bank failure

Knowing what is covered is a very important thing, but understanding what isn't covered is even more important because this can help you make real investment decisions. FDIC insurance only applies to bank deposits which include checking accounts, savings accounts, NOW accounts, money market accounts and CDs. But you should also know that it doesn't cover deposits into things like mutual funds, stocks, bonds or Treasury bills, annuities. You should also know that FDID doesn't cover these things even if they were purchased at a bank. FDIC insurance doesn't cover investments that are not deposits. Now, this does not necessarily mean that you will loose all of the money that you have being held at a bank in the case that that bank fails. In most of the above mentioned banking situations you are not dealing solely with the bank when you are investing or depositing your money. You are using the bank as an intermediary partner to a broker. Technically, the money that you have at the banking institution does not belong to the bank. In fact, banks cannot list these deposits as assets. They are holdings that the bank has specifically set aside. In the case of a bank failure as the onset of regulators demanding the bank's assets begins, these accounts are not touched. You are still the owner of these investments, not the bank. However there is a downside, as is the case with a recession (a common cause for bank failure in the first place) the market value of your assets will most likely be lower. When claiming investment funds from a bank failure you will be restored the current market value of your holdings. You may also temporarily loose assess to your funds as other bank assets are being acquired by regulators. The FDIC does try to prevent this delay but they are not always able to prevent the inconveniences that may result.

How to protect yourself

Now that you know more about what you can expect in the event of a bank failure, it is important to know what things you can do to protect yourself from as many undesirable consequences as possible. The first thing that you can do to protect yourself from bank failure during tough economic times is to save money now. Often times people put off saving money until it is too late. Although recessionary periods are very difficult times to be thinking about setting aside much needed money, it is often the most important thing that you can do. Experts suggest that budgets be set up so that about 15% of one's income is automatically set aside in some sort of savings or investment account (the choice is yours as to which one you choose and what risks you are willing to assume). Another way to protect yourself from bank failure is to get yourself out of debt. It may sound out of place that avoiding debt will help in the case of a bank failure, but consider what happens to the value of your home during tough economic times. The value of your home decreases but your amount of debt remains the same, it is very easy to have not been actively working on lowering your debt and then be left with a home loan debt that is greater than the house is worth. The failure of a bank and the transfer of that loan is, to say the least, going to cost you a significant investment. Make sure that your bank is properly solvent and insured. All banks are not the same. Evaluate the risks of various financial institutions and make the best decision possible. If you are interested in protecting your money against inflation, bank failure, currency risk, etc. you might want to investigate investing in gold or silver. Contrary to most other types of investments, in recessionary periods when the dollar is loosing its value, assets such as gold and silver actually increase in value. Of course there are traditional suggestions to avoiding financial risk that apply to a number of different situations. For example, financial advisors have long advised that individuals obtain the education and experience needed to diversify their ability to earn income. In the case of a poor economy and even job loss, you can turn to your other skills to earn money and keep your account open at the bank where you are keeping your money safe. There is, after all, little point in worrying about bank failure if you do not have a job or a way to bring in enough money to keep your accounts open in the first place. Making changes towards being more personally responsible for the money that you make is going to be one of, if not the, biggest factor in ensuring that you have the money that you need to get by.

Protecting yourself form bank failure is something to keep at the back of your mind. If you have considered the risks of where to put your money and have done all in your power to ensure that that money is safe and secure, you will generally have little or nothing to worry about, even in the case of widespread bank failures. Preparation and education are vital when it comes to being smart with the money that you work hard to earn. Make sure that you invest as much time in decisions regarding the allocation of your money as you do making decisions regarding how to earn that money. With a little know-how there are many dangers and high risk investment situations that can easily be avoided.

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