Conventional wisdom says having more than $250,000 in cash on hand is a good problem to have.
Then came the collapse of Silicon Valley Bank and a last-minute intervention from the U.S. federal government to save depositors from losing millions of dollars or more in bank deposits.
All of a sudden, having large cash deposits in a single bank seems like a bad idea. Well-heeled financial consumers understand that and are burning up their phone lines calling accountants and financial advisors for advice.
The refrain is the same - “Where do I put all my bank deposit cash so it’s safe and sound?”
Where to Stash Your Excess Cash?
It’s a fair question.
Currently, only the first $250,000 in customer bank deposits are insured by the U.S. Federal Deposit Insurance Corp., the federal agency tasked by the federal government to maintain stability and consumer confidence in the nation’s banking ecosystem.
The big concern for SVB and its customers was the per-account cash deposited past $250,000. For a few days, those depositors face a nightmare scenario – any cash deposits above $250,000 in the failing bank weren’t insured and there was a good chance that money would not be returned to the customer.
Fortunately for SVB customers, Uncle Sam rode in to save the day, but there’s no guarantee that scenario will reoccur the next time a bank fails.
For banking customers with more than $250,000 in bank deposit cash who need to protect that cash from future bank collapses, the question is where to put that excess money.
Here are a few time-tested strategies.
For starters, don’t panic. For all the dire headlines about SVB, and even though there are over $3 trillion in “excess deposits” in the U.S. according to the U.S. Comptroller of the Currency, bank failures are a rarity.
In fact, there were no bank failures at all in 2021 and 2022, and only four in 2020. That’s encouraging, given there are over 4,800 federally insured U.S. banks.
So, yes, it’s a good idea to talk to a trusted financial professional if you have more than $250,000 in bank deposit cash. By and large, however, the odds of your bank or credit union going belly-up are extremely low.
Spread your wealth. To make sure all your bank deposit money is insured, leverage financial institutions like IntraFi Network Deposits, which can steer excess cash above the $250,000 amount into bank accounts at FDIC banks that run in the SFND network.
Additionally, Impact Deposits Corp. provides deposit insurance protection for excess deposits via 200 FDIC-insured community banks operating in its network.
Spread your money around on your own. There’s no law that says you can’t bank with two or three trusted and chartered banks in your vicinity, or even online. You’ll need to be organized, but for someone with $750,000 in cash, for example, opening accounts three separate $250,000 bank accounts can give you the insurance protection you need.
Open a joint account. If a couple opens a joint savings account at a chartered financial institution, each spouse is eligible for up to $250,000 in FDIC insurance. That’s a great way to protect $500,000 in household bank deposit cash.
Open a brokerage account. Brokerage firms are also a good place to park excess household cash, as many offer bank-like certificates of deposit from banks all over the U.S. That not only offers extra deposit safeguards it also gives you multiple choices when choosing CDs.
You Have Options
These aren’t the only ways to protect excess financial institution deposits, but they’re certainly viable and available immediately for anyone vexed over having $250,000 in the same bank these days.
Talk to your trusted financial professional today and see how easy it actually is to protect not just the $250,000 you have a bank, but every penny above that amount, too.
