How Safe Is Your Cash?
Galley Proof
Sept. 29, 2008

 It’s tough out there. Businesses are closing, and they’re leaving a trail of unpaid vendors with little recourse but to write off their losses. With financial giants struggling, laying off or closing; with home foreclosures, asset seizures and business failures reaching an all-time high; with the federal government bailing out the U.S. economy; with the U.S. dollar shrinking and costs rising; have you asked yourself, “Is my money safe?”

The FDIC insures accounts up to $100,000—not one penny more. Financial gurus are crying “diversify” to protect net worth. But does it work? And what does it mean to you?

Do you or your business have multiple accounts at the same bank? Do those accounts share the same identity—the same social security number or tax ID? If so, they are essentially one account—even if you’ve named the accounts differently. Having separate accounts in the same institution, that share one identity, puts you at risk if the total of your accounts exceeds $100,000. Should your bank fail, the FDIC would bundle all of your accounts, treating them as a single entity. Whatever the value of your account, whether it’s $550,000 or $150,000, you or your business will only receive $100,000 should your financial institution collapse.

The solution? Diversify amounts exceeding $100,000—not between accounts in the same institution, but between banks. Set up separate accounts, spread among different banking institutions. You may choose to have investment accounts at a select group of institutions, while your operating accounts are at others. Then establish the tools to move money electronically between institutions as needed. Should one of your banks fail, you would still have other active accounts that would enable you to continue operating your business. Should one of your banks fail, your account is federally insured—up to $100,000. Doing this can help you avoid becoming part of a sad statistic.

Could you or your business be at risk? Can you survive a substantial loss? Few people or businesses can. Should this scenario concern you, PII encourages you to seek advice from your corporate attorney or financial advisers.