As your trusted advisors, we wanted to bring your attention to the potential risks associated with holding more than $250,000 in cash at a bank, even when held in multiple accounts. Recent events, such as the failures of Silicon Valley Bank and Signature Bank, have shown that this risk is very real.
While in rare cases, the FDIC may provide additional insurance coverage to depositors beyond the $250,000 limit, it is not guaranteed to happen in every bank failure. Due to concerns about the systemic risk to the banking system, the government has recently chosen to insure all qualified deposits at these institutions, but this may not always be the case.
The FDIC typically insures deposits up to $250,000 per depositor, per insured bank. This means that if a bank were to fail, you would be covered up to $250,000 in losses. However, if you have more than $250,000 in cash at a bank, the excess amount would not be insured by the FDIC, and you could potentially lose those funds.
It is important to note that the FDIC limit applies to each depositor, not an account. If you have multiple accounts at the same bank under the same depositor, the FDIC will insure each depositor up to $250,000.
To mitigate this risk, we recommend spreading your funds across multiple banks to ensure that each account is insured up to the FDIC limit. Alternatively, you can explore other investment options that provide higher levels of security, such as U.S. Treasury securities or FDIC-insured certificates of deposit (CDs).
We have included a link to the FDIC brochure for your convenience and further reading: https://www.fdic.gov/resources/deposit-insurance/brochures/documents/deposit-insurance-at-a-glance-english.pdf
If you have any further questions or concerns about the risks of holding more than $250,000 in cash at a bank, please do not hesitate to contact us. We are always here to assist you in making informed financial decisions.