MMOD: Losing your savings

So, this is my kick off article for Mikes Minute of Doom. In MMOD's I'll highlight issues that can directly impact you and offer up ideas for what you need to do about them. This will be mixed in with my normal blog posts. So all you naysayers.... this Buds for you!

I first notified my friends about this issue over two months ago, so this is both a repost and a follow-up. The topic is bank failures.

Presently, there are about 8,000 banks in the US. Over the next 12 months, somewhere between 150 and 1,000 are expected to go 'insolvent', meaning bankrupt. What happens to your money if your bank goes bankrupt? Good question.

the FDIC insures money in banks in the US, but only up to a point. That point is typically $100,000. If you have money over and above this, and your bank goes bust, you just lost everything over that $100,000. Now $100,000 sounds like a lot, but it may not be, consider this...

Maybe you have multiple accounts? CD's? an IRA or 401k? These accounts have different dollar limits for FDIC protection, do you know how much you'll lose when your bank goes bust?

Also consider, are you part of a church or charitable organization or group? or do you have a small business or know a small business owner? It's very easy for these type of organizations to have more than $100,000. Guess what, the same $100,000 limit applies.

Now, the 'I told you so".. Last Friday, IndyMac bank went bust. They are the first. Guess what happened to those people with more than their FDIC limit in? They lose. Maybe even their life savings. Don;t let that happen to you or people you know.

How do you take action?

1. Make sure you know the FDIC rules. DO NOT trust what the bank tells you.
2. Split your money amongst two or more banks, keeping it within the FDIC limits.
3. Check the status of your bank on bankrate.com, you can key in your banks name and see how healthy it is or isn't. IndyMac was as 1 star of 5 and had a -7% profitability.

Finally, let's talk credit unions. Credit Unions have a very similar setup EXCEPT some are insured by a national agency (like FDIC) called the NCUA. However, some credit unions are not insured by NCUA, but are insured by state-based organizations. My advice would be to stay away from those, they pose a bigger risk than NCUA insured credit unions.

The final word... when your favorite retail store goes bust, you lose your money stored in those gift cards. Spend them NOW and don't buy them as gifts anymore. Cash is always in fashion... wise words and a birthday hint.

;)

This is Mike Rineman and I endorse this 'Mike's Minute of Doom'. Your mileage may vary.