Last night, Washington Mutual became the largest bank failure in U.S. history. While much of its $182 billion in deposits were insured by the FDIC, amounts over $100,000 are not and may be lost forever. In addition, many depositors are reporting challenges in rapidly accessing their funds today, even though they may not be at risk.
Washington Mutual is also the thirteenth FDIC insured bank to fail this year, which is more banks than have failed in the past five years combined. With the anxiety and volatility the financial markets are still experiencing, more failures are practically a certainty during the fourth quarter.
What should you do? Well, certainly don’t panic. Keeping your money safe isn’t hard if you follow a few important guildlines:
Make sure that your bank is FDIC insured.
Don’t put all of your (nest)eggs in one basket. If you have more than $100,000 in deposits, spread them out across multiple institutions. The FDIC insures $100,000 per depositor, not account!
Be wary of money market accounts. Money market accounts are not insured, and several have recently “broken the buck” meaning that your investment has actually declined in value. High yield savings accounts are very competitive with most money market accounts right now, so why take on the added risk?
Make sure you can access some cash quickly. In the event of a bank failure, your funds may be perfectly safe but hard to access for a few days or weeks. Do you have cash-on-hand or an account with another bank that could tide you over?
Follow instructions. Bank runs aren’t as depicted in It’s A Wonderful Life. When a bank is shut down, the FDIC has very strong procedures in place to ensure that depositors get their money bank, which it always updates on its Web site.
