How to diversify your money when banks fail

gave The recent collapse of Silicon Valley Bank Many Americans are Concerned about the stability of the banking system. Although President Biden has assured consumers that the system is safe, the change underscores the importance of diversifying your money.

Spreading out where you hold your money can help reduce risk. While the Federal Deposit Insurance Corporation protects deposits up to $250,000 per bank, amounts above that limit are 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 wise 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 grows faster the longer you keep it in the account.

What 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 bank interest rates are based on the federal funds rate, Rising inflation Can really enhance your balance. The higher the federal funds rate, the more interest you will receive.

It is better to keep your money in a high-yielding savings account to earn maximum interest. But you can withdraw your funds if needed, such as to cover emergency expenses. You’ll want to be aware of any minimum balance requirements and withdrawal limits to avoid fees. These vary from bank to bank.

There are many types of high-yield savings accounts to choose from. Money Market Accounts and Cash Management Accounts (CMAs). which one 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, choosing an institution and filling out an application. Compare your high-yield savings account options. Now to start.

Certificates of Deposit (CDs)

Oh Deposit Receipt 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 specified period of time (from three months to five years). If you withdraw before the end of the period, you will have to pay a fee.

The interest rate on a CD is fixed and set when you open the account. That means you won’t earn extra if the federal funds rate goes up. On the other hand, if the federal funds rate goes down, your rate won’t go down. When interest rates are high, you can guarantee a better 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.

The 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 when inflation rises, but also want to be able to access your funds if you need them. A CD is best if you want a higher fixed rate and can afford to leave your money in the account for a while. It can also help you avoid the temptation to use your savings unnecessarily.

That said, there’s no reason you can’t have both if it makes sense for you. It’s another way to diversify your money and keep it safe no matter what the banking system and the larger economy is doing.