How to Diversify Your Money When Banks Fail

The The recent collapse of Silicon Valley Bank There are many Americans Concerned about the stability of the banking system. While President Biden has assured consumers that the system is safe, the shakeup highlights the importance of diversifying your money.

Spreading out where you put your money can help reduce risk. Although the Federal Deposit Insurance Corporation protects deposits up to $250,000 per account per bank, any amount over that limit is not protected. By maintaining multiple accounts at multiple FDIC-insured banks — or at least multiple accounts at one FDIC-insured bank — you can protect your money in the event of a bank failure.

There are two sensible ways to do this High yield savings And Certificate of Deposit (CD) Accounts Both of these products offer higher interest rates than traditional savings accounts, so your money will grow faster the longer you keep it in the account.

Which type of account is best for you? Let’s take a closer look.

How to Diversify Your Money When Banks Fail

Here are two ways you can protect (and grow) your money in today’s economic climate.

High yield savings

A high-yield savings account offers interest rates in the 3% to 4% range, compared to 0.33% for most traditional savings accounts. Since banks’ interest rates are based on the federal funds rate, Rising inflation Can really increase your balance. The higher the federal funds rate, the more interest you’ll earn.

Better to park your money in a high-yield savings account to get the most interest. But you can withdraw your funds if needed, such as to cover an emergency. You’ll just want to be aware of any minimum balance requirements and withdrawal limits to avoid fees. These vary from bank to bank.

There are a variety of high-yield savings accounts to choose from, including Money Market Account and Cash Management Accounts (CMAs). which The type of savings account is best for you Depends on your financial needs and goals.

you can Open a high-yield savings account By comparing lenders and rates, choose an institution and fill out an application. Compare your high-yield savings account options now to get started.

Certificate of Deposit (CD)

A Certificate of Deposit Offers interest rates in the range of 3.5% to 4.5%. In exchange for a higher rate, you agree to keep your money in the CD for a fixed term (ranging from three months to five years). You will have to pay a fee if you withdraw money before the expiry date.

The CD interest rate is fixed and set when you open the account. That means you can’t earn extra if the federal funds rate rises. On the other hand, if the federal funds rate goes down, your rate won’t go down. If interest rates are high, you can guarantee a well-fixed rate by opening a CD.

You can open a CD by comparing lenders and rates, choosing an institution and filling out an application. Explore your CD options online now or use the table below to get started

Bottom line

The best savings vehicle for you depends on your personal needs and financial goals. A high-yield savings account is best if you want to maximize your interest while inflation rises but want to be able to access your funds when you need them. A CD is best if you want to earn a higher fixed rate and leave your money in the account for a while. This can help you avoid the temptation to tap into your savings unnecessarily.

That said, there’s no reason you shouldn’t have both if it makes sense to you. It’s another way to diversify your money and keep it safe, regardless of the banking system and the wider economy.