Protecting Your Financial Assets in the Event of Another Bank Collapse

• Author: Jenny Wolff
• Posted: 2024-06-04

You are not alone if you are feeling anxious about the recent collapse of both the Signature Bank and the Silicon Valley Bank. While the money was protected by the Federal Deposit Insurance Corporation (FDIC) at both of these institutions, you may not always be as lucky as these bankers. Here are a few ways that you can protect your money in the event of a collapse as your financial institution.
 

Choose an Insured Bank

In addition to the FDIC, the National Credit Union Administration provides deposit insurance to both bank and credit union customers. In the event of a collapse of one of these insured institutions, the appropriate agency will cover losses of up to $250,000 for each depositor. This is why it is vital that you choose a bank that is covered by one of these agencies. This is a good time to check with all of the places that you hold money and make sure that they are properly insured.

It is also recommended to diversify your financial risk. Deposits of less than $250,000 at an insured institution are not going to be an issue. However, problems may arise if you carry balances of more than this amount at any one bank or credit union. Spreading your money out so that you stay under this $250,000 threshold will ensure that you always have adequate insurance on your funds. This is particularly important for owners of small businesses.
 

Understand Your Bank's Solvency

Knowledge is power when it comes to protecting your money. This knowledge starts with understanding your bank's solvency. A bank collapses when its assets drop below the market value of its debts and liabilities. Researching and keeping tabs on your bank's solvency will give you confidence that it is able to fulfill its promised obligations to its customers.

Do not be afraid to reach out to your bank to ask them to address any of your concerns. All respected institutions should be able to provide notifications that alert customers of any suspicious activity on their accounts. Do not ignore these alerts should you receive them.
 

Do Not Panic

It is natural to panic if you hear rumblings of an imminent collapse of the institution that holds your money. However, it is important to stay calm and not make any rash decisions that cannot be reversed during the time of uncertainty. Everyone panicking and withdrawing money actually makes the problem worse. Instead, you want to avoid making impulsive decisions with your money. Your cash will be protected if it is ensured by the FDIC.
 

Stay in the Markets

It may be tempting to want to pull your money out of the stock market when you hear the news of a bank collapse. It is important to remember that while negative news does indeed impact the stock market as a whole, the two elements are not entirely related. Just because one bank fails, it does not mean that the financial markets are on the verge of a collapse. Panicking and pulling your money is essentially selling low, nearly guaranteeing a loss at some point. You will earn more money in the long run if you resist the urge to exit the markets.
 

Lean on the Professionals

You may want to consult the expertise of a professional if you are concerned about your own personal knowledge about protecting your assets. A financial advisor will be able to check your accounts and consult with you about the safety of your money. This outside consultation will help you to develop a strategy to guard your finances and your overall future.

As a consumer, you cannot control the success of the banks that you lean on to protect, store, and guard your money. However, you can be proactive about ensuring that your financial assets are protected regardless of where you keep them. Keeping these tips in mind will give you confidence that your money will be kept safe during these tumultuous times. You can never be too careful with your money as economists predict a rocky road ahead for the overall health of the economy.