Should People Keep All Their Money at One Bank?

[scfr]

In light of the Indymac Bank failure, I'd like to rekindle an old discussion:

Should people keep all of their money at only one bank, or should they spread their funds around among 2 or more banks?

I now believe more firmly than ever that people should keep funds at at least 2 banks. I'm thinking that it's perfectly fine to keep most of your funds at just one bank (your main bank), but that some money should be kept in a 2nd bank ... at least enough to cover one month's expenses of anything that can't be put temporarily on your CC (rent, perhaps utilities, etc). Does this sound like a good rule of thumb?

[omicron]

I think you should keep at least 3 different bank accounts. One at your local brick & mortar bank and two other online banks. The 2nd account should be able to fund two to four months worth of emergency income (and just in case you can't access the 3rd "bulk" account), and the other account should carry the bulk. The first account should be your regular checking transactions.

[PrincessPerky]

Well I am a fan of not keeping all your eggs in one basket, but at the same time, if you only have two eggs there is little point in splitting them up.

Of course if you only have two eggs you aught to work on that.

[disneysteve]

I think it depends on your situation. If you are just starting out, as PrincessPerky alludes to, if you don't have much, it will probably all be in one place. Once your assets grow, your money will naturally tend to be spread around. We've got a checking account, 3 money market accounts, a brokerage account, several mutual fund accounts, a few IRA/Roth accounts, a 401k, a 403b, etc. Many different institutions hold parts of our assets.

[Ima saver]

I have my cash sitting in 4 separate banks, locally. I also have an online bank and a vanguard money market fund. I keep mine in 4 separate banks so I can get the fdic insurance. I have decided that when my big c.d. matures in Jan., I will take the interest and put it into another bank so that I will be under the fdic insurance limit.

[scfr]

Bankrate.com did a Q&A with an FDIC spokesperson that was interesting:
What happens when a bank fails?

It sounds as if, as long as your bank is bought out by another party, and you are under the FDIC limit, things will go on as usual. HOWEVER, if there is not a buyer for a closed bank, then any checks in transit will be returned stamped "bank closed" and customers will receive checks in the mail for their balances. It is the 2nd scenario that concerns me. So far, failed banks have been bought out (or taken over by someone ... I'm not clear as to who owns Indymac now). There are indeed some big fish out there in the banking industry. But a big fish can only eat so many small fish before it starts to get diarrhea.

I think omicron's standards are good, but as others have said, not everyone has enough cash that they can spread it around among 3 or more banks. Hence my proposal that everyone strive to have enough to cover one month's minimum expenses in a bank other than their primary bank.

[fruitbowlk]

I have 4 different banks I deal with. One has our joint savings account and CD. One is for my checking. One is for my EF and one is for my vacation and Christmas account.

[Hot dog]

Ima id love to have those same problems of having to have 4 banks so that it would be fdic insured

[rob62521]

Hot Dog -- they don't call her Ima Saver for nothing! :-)

I think having your money in more than one bank makes sense, especially with so many banks having problems. Our financial advisor was telling us if our bank is FDIC and that if it closed, we would still have our money, but would probably be inconvenienced for a few days or a couple of weeks. We aren't rich by any means, but we do have money in a few different places so if one closes and has to wait to reopen, we can continue to pay bills until the bank opens again.

[responduser]

IMO, we should have more than one bank account. It really helps.

[Joan.of.the.Arch]

IMO, we should have more than one bank account. It really helps.

It really helps, how? Do you mean it just helps you keep ordered what savings is dedicated to what purpose or whose money is whose? We basically have our banking all in one account. We don't have difficulty tracking what our money is dedicated for while it remains in one account. If the FDIC truly would function as promised, I don't think a bank closure would be much inconvenience to us, so having a second or third account as a back-up is not an issue.

Of course, not all our money is at one bank because most of it is not banked at all, but in investments apart from banks.

If I make a decision to have accounts at other banks, it will not be for fear of bank closure but for some benefit or convenience the bank offers. In fact, I think I mentioned recently that we had opened a credit union account for our emergency fund, as it earns nice interest there. But that is kind of a passive holding for us. The active account is in a single bank.