A Reader Asks: Is My Money Safe in the Bank?

by Laura Rowley Oct 5th 2011 8:00AM
How safe is the money in our bank accounts? One reader wants to know, especially given concerns that a Greek default on government debt could ripple across the global banking system. Separately, more than 70 U.S. banks have failed this year, according to the Federal Deposit Insurance Corporation. DailyFinance's Laura Rowley responds.

















Do you have a personal finance question? Send it by email, or email a short video of yourself asking the question, and we'll post your video with the response on DailyFinance. You can also ask your question via Skype. Contact laura.rowley@teamaol.com. You can also follow me on Twitter @MoneyHappiness.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »
View All Courses

Add a Comment

Sign in »
*0 / 3000 Character Maximum

19 Comments

Filter by:
cctgos

Hey folks with the my Mom or Dad or Dead Relitives make $77.00 an hour iS BS my girlfriend make twice that,
I just have to keep the RED light on -- Need to get another case brun out to fast must be made in china - Yep

Just kidding people calm down!!

October 05 2011 at 6:57 PM Report abuse rate up rate down Reply
charpist5

Oh yeah. Our money is SO safe. Newsflash...the government is OUT of money. Has been for quite awhile. What does THAT say for your "insured for $250,000.00" account?

October 05 2011 at 4:53 PM Report abuse +1 rate up rate down Reply
mouse

If the USA goes, all the money is worthless anyway so it wouldn't make a bit of difference where you kept it but if you trust the government as a whole and put your money in a federally insured bank that's the best choice if you want easy access to your funds. Putting it in a cookie jar leaves you prey to robbers, buying stock means you will win or lose depending on the stock and even a winning hand will lose money if you cash out early.

October 05 2011 at 4:27 PM Report abuse +1 rate up rate down Reply
MadCaps

IF YOU ASK SUCH A DUMB QUESTION LIKE THIS; I SUGGEST YOU PUT YOUR CASH IN THE VALVE TO YOUR AIR MATTRESS...

October 05 2011 at 4:08 PM Report abuse rate up rate down Reply
venturamickey

I Recommend you nvest in lead and store up a years food then try to buy 20% of your total worth in commodities like silver or gold and hang on to your hat bro. This current administration is putting the lid down on America's coffin quick.
SOLUTION IMPEACH THEM ALL and get some Constitution loving, Republic preserving, God fearing, America loving men and woman in office.

October 05 2011 at 2:14 PM Report abuse +2 rate up rate down Reply
RockStar

Your money isnt safe anywhere. It will soon be a worthless since it is a FIAT currency anyway and Obamas Puppet Master George Soros is working on devaluing it, in his own words......

October 05 2011 at 2:12 PM Report abuse +2 rate up rate down Reply
donut999

Short of Armageddon, your bucks are safe. That said, is a financial Armageddon in the cards? Someone below noted we were on the brink in 2007, and we really were. So, the tarp, aig, bear stearns, etc happened. That was then, and doubt the guv/fed/treasury could or would repeat. If you can, keep some hard commodities on hand, gold and silver the best. Alternative currencies like Euro might work. It is not too far fetched to anticipate there could be days or even weeks we would not be able to access our "green" currency. Even then, what will be its' worth or buying power be depending on the circumstances? No reason to chicken little on this, but smart folks plan. Would bet a euro or 2 that anyone in this country with a net liquid worth of $1-2 million plus has 10 to 25% of it in liquid, hard assets like gold, silver, guns and ammo, etc..

October 05 2011 at 12:59 PM Report abuse +1 rate up rate down Reply
1 reply to donut999's comment
dabrownman

The US isn't the problem this time but European financial institutions and sovereign debt are. they are in the same position,only\ worse than we were in 2007. The Euro looks like it is heading to US parity withing eh next year and the dollar is what will strengthen as the currency of last resort and trade in the world - just like Europeans have been flocking to US bonds even though they don not pay enough interest to cove a tenth of the inflation. Gold and Silver investments I have no problem with even though the US dollar and the Euro have both lost value over 10 years while gold has tripled.

October 05 2011 at 6:22 PM Report abuse rate up rate down Reply
donut999

est

October 05 2011 at 12:46 PM Report abuse rate up rate down Reply
yurday6

Bankrate.com rating of banks financial stability is often six months old. During this six month window a five star bank could become a one star or even become insolvent. The odds are slimmer but it could happen and it does happen. Bandrate.com should be reporting much faster.

October 05 2011 at 11:09 AM Report abuse +1 rate up rate down Reply
joethightwad

Your savings, up to $250,000 are safe so long as the institution in which they are deposited is covered by the FDIC or the corresponding agency that insures credit union deposits That said, Federal insurance does not protect against inflationary loss. Following the Crash of '29, millions lost their life savings when thousands of private and state banks closed their doors. The New Deal response to this was to close all banks for a brief period, the so-called "bank holiday", until it could be determined which were solvent enough to re-open. Those healthy enough were subsequently insured against loss of deposits. In effect, the government let risky banks fail. while saving the value of thedollar. Many European countries had borrowed heavily from us during World War I and we wanted those debts paid with dollars as good as those that had been lent. With today's banks and credit unions insured, when one becomes insolvent the FDIC will first seek to fold it over into a healthy institution and cover any losses from the premiums it collects from all participating banks. If the fund is exhausted, Congress would need to appropriate additional money or the Federal Reserve, acting through the Treasury would print the necessary cash. Hence, the inflationary risk. You get your money, but it may not be worth as much as that which you put in.

October 05 2011 at 11:05 AM Report abuse -1 rate up rate down Reply
2 replies to joethightwad's comment
rgkarasiewicz

Joethightwad is right. The FDIC not only does not guarantee against inflationary loss, but it could be some time before you could recover any of your deposits. Irregardless of FDIC insurance, the banks and credit unions all could close down (they almost did in October 2007) during a financial panic. In that scenario, withdrawals of any type would be severely rationed.

October 05 2011 at 12:08 PM Report abuse -1 rate up rate down Reply
dabrownman

If your cash is in money market accounts then they are subject to the shares being worth a dollar every day at the close. Money market funds traditionally invest in sovereign debt especially sovereign debt of Europe. During the crash in 2008 the dollar per share rule was busted due to sovereign debt losses and this is what caused the huge following crash.

Today the likelihood of Greek and Italian debt holders taking a hair cut of 50% puts money market funds in a real bind if they have invested in those notes and they likely have done so even if indirectly. If the Germans and French or EU through bonds that do not exist now actually bail Greece and Italy out then their sovereign debt will also take big hits and there is no doubt that all money market funds have invested in French and German bonds.

Any bust of the money market dollar value will cause a crash worldwide just like 2008 and no government coalition can stop that as we found out that there really are things that are too big to fail.

October 05 2011 at 12:31 PM Report abuse +2 rate up rate down Reply