Money in the Bank: How the FDIC Keeps Your Deposits Safe

The recent implosion of Silicon Valley Bank has left investors and customers alike wondering about the fine print of their Federal Deposit Insurance Corporation (FDIC) coverage. So, what happens when a bank goes belly up and your hard-earned cash is at risk?

Well, in the case of SVB, the Fed, Treasury Department, and FDIC all teamed up to cover depositors above the standard threshold - phew, crisis averted. But let's face it, this kind of bailout isn't the norm. Lucky for you, we’ve broken down what you need to know about protecting your precious moolah.

FDIC: Your Money's Superhero?

The FDIC…it's like that quiet friend who's always got your back, even when you don't know it. Their mission? Keep the public's trust in the U.S. financial system and make sure it doesn't go off the rails. And how do they do it? By being the ultimate guardians of your hard-earned cash.

Not only do they ensure your deposits, but they also keep an eye on financial institutions to make sure they're playing by the rules and protecting consumers. And in case things go sideways, the FDIC is there to pick up the pieces and manage any financial fallout.

Is Your Cash Protected? The Scoop on FDIC Insurance Limits

Our friendly neighborhood protector of bank deposits has your back up to $250,000 per institution (and maybe more if the situation warrants it). But wait, there's more! Remember that time when SVB went down and wreaked havoc on the regional banking sector? (Hopefully your sarcasm sensors went off)

That has now forced some lawmakers to push the FDIC to up those limits on the reg. Sounds like they're trying to make sure you can sleep soundly at night, without worrying about your hard-earned cash disappearing into the abyss.

Sleep Easy with These FDIC-Backed Deposit Products

Let's talk about the FDIC and what it actually insures, shall we? We're talking:

• Checking accounts
• Savings accounts
• Money market deposit accounts
• CDs
• Prepaid cards (with some FDIC caveats, of course)
  

However, the amount of insurance coverage you're entitled to actually depends on what FDIC "ownership category" you fall under. Sounds complicated, right? The most common individual categories are:

• Single accounts
• Joint accounts
• Revocable trusts with beneficiaries (which is basically a math problem),
• Certain retirement accounts (which get capped at a measly $250K).
  

And guess what? If you've got one of each of these categories, you could potentially be insured for more than $250K. Time to start diversifying, folks!

Left Out in the Cold: Investment Products That Won't Be Covered

We know the FDIC is pretty great and all, but let's not get ahead of ourselves. It's important to remember that not all investment products are created equal. In fact, some non-deposit investments won't be covered by the FDIC, even if you bought them from an insured bank. We're talking about:

• Stocks
• Bonds
• Mutual funds
• Crypto assets (cue the volatility)
• Life insurance policies
• Annuities
• Municipal securities.
  

And as much as we'd love to stash our valuables in a safe deposit box and call it a day, the contents of those boxes aren't insured either. But hey, at least we can rely on U.S. Treasury bills, bonds, and notes to have our backs, thanks to that whole "full faith and credit of the U.S. government" thing.

Salt’s Takeaways

While it may not be the most thrilling topic (trust me…I just did all the research 🥱), understanding how your money is protected can give you peace of mind and help you make informed financial decisions. So, the next time someone tries to make small talk about the FDIC at a party, you can confidently chime in with your knowledge of ownership categories and deposit insurance limits.

Or you can just enjoy the snacks and find someone else to chat with - the choice is yours (although I’d side with this one). In any case, remember that financial education is a powerful tool, and taking the time to understand the ins and outs of the FDIC is a great step toward achieving your financial goals.