18 - FDIC Insurance: Is My Money Really Safe?

In this episode, we answer one of the most fundamental questions in banking: is my money safe? This episode is a confidence-building deep dive into the protection that backs your deposits. We'll explore the history of the FDIC, explain exactly what's covered (checking, savings) and what's not (investments), and show you how the $250,000 insurance limit works and how you can get even more coverage at a single bank.

The FDIC’s Electronic Deposit Insurance Estimator (EDIE)

• https://edie.fdic.gov/

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Transcript

18 | FDIC Insurance: Is My Money Really Safe?

00:00:00 Daniel Hill: All right, Shanna, ever so often you see a headline about a bank failing somewhere in the United States.

00:00:08 Shanna Browning: It's a terrible, terrible feeling. And it's an unsettling feeling. And you see the news. And even though it might be happening far away from where we are, it's just natural to have that little, unsettling feeling of, wait a minute, is my money safe?

00:00:25 Daniel Hill: Oh, it's a fundamental question, and it's one that we take incredibly serious here at First Century, because that trust is the foundation of who we are.

00:00:37 Shanna Browning: And it's it's the trust of knowing your your bank is going to take care of you. And back in our very first episode, we talked about that. We talked about the deep history of First Century Bank and how being a Tennessee tradition since 1894 means we've seen a lot. Our bank was built to be a stable cornerstone for our communities, and it proved that by weathering the Great Depression when many other banks failed.

00:01:03 Daniel Hill: Absolutely. That local century long history of stability is the very first layer that our trust is built on. And today we want to talk about the additional layer of protection that exists for every single one of our customers.

00:01:20 Shanna Browning: And you're talking about that very critical, government backed safety net designed to give everyone complete peace of mind. And I know sometimes when we say government, you don't feel real great about that. But this is very true that it is a government backed safety net. And we're going to pull that curtain back on it today to show you that your money really is incredibly safe.

00:01:53 Daniel Hill: Welcome back to Making Sense of your Cents. I'm Daniel Hill.

00:01:57 Shanna Browning: And I'm Shanna Browning. And today we're going to tackle one of the most important and reassuring topics in all of banking. FDIC insurance.

00:02:08 Daniel Hill: Man, we often see that little gold and black FDIC logo on our door or at the bottom of our website. But today we're going to break down what it actually means for your wallet, what is covered, and just as importantly, what isn't.

00:02:24 Shanna Browning: All right, Daniel, let's start back kind of at the the very beginning here when we see the acronym FDIC, what does it actually stand for?

00:02:33 Daniel Hill: Well, FDIC stands for Federal Deposit Insurance Corporation. It's an independent, that's very important, it's an independent agency of the United States government. And its entire mission is to maintain stability and public confidence in the nation's financial system.

00:02:52 Shanna Browning: But we know it's also not been around forever.

00:02:54 Daniel Hill: Right.

00:02:55 Shanna Browning: So I know our bank's history since 1894, that there was a time before that protection even existed. So why was the FDIC created in the first place?

00:03:05 Daniel Hill: Well, Shanna, that goes back to the Great Depression in the late 1920's and early 1930's the country experienced a massive wave of bank failures. Thousands of banks closed their doors.

00:03:20 Shanna Browning: And my grandparents were part of that generation. And so in those days, if a bank failed. Well, the depositors money was just gone.

00:03:29 Daniel Hill: Wow.

00:03:30 Shanna Browning: Like just gone. And people lost their entire life savings overnight.

00:03:35 Daniel Hill: And it created widespread panic. The fear of a bank failing would cause bank runs where everyone would rush to withdraw their cash at the same time, which in turn would cause even a healthy bank to fail. It was a crisis of confidence.

00:03:52 Shanna Browning: And a hard lesson to learn, because the government stepped in to stop the cycle, and they wanted to restore that trust.

00:04:00 Daniel Hill: Precisely. And in 1933 Congress created the FDIC, the Federal Deposit Insurance Corporation. The promise was simple and powerful. If your bank fails, the government guarantees that you will get your insured deposits back. And Shanna, the track record is incredible. Since 1933, no depositor has ever lost a single penny of FDIC insured funds.

00:04:29 Shanna Browning: Now, that is a good track record. No question about that. So let's get specific on that. When we say insured deposits, what types of accounts are we actually talking about?

00:04:39 Daniel Hill: Well, as the security officer here and the marketing coordinator, I do get the question a lot. The FDIC insures deposit products that form the core of most people's financial lives. This includes your checking accounts, savings accounts, money market deposit accounts, and your certificate of deposits.

00:04:59 Shanna Browning: Okay, so basically the cash you have deposited at the bank for safekeeping and pretty much daily use. It even covers things like cashier's checks or money orders issued by the bank. Right?

00:05:10 Daniel Hill: That is correct. Now, what's just as important of what is not covered? This can be a point of confusion.

00:05:18 Shanna Browning: And so I think people often assume everything at the bank is covered. But that's just not the case for investment products.

00:05:25 Daniel Hill: Exactly. And this is a critical distinction. FDIC insurance does not cover investment products. Even if you buy them at a bank location, this includes stocks, bonds, mutual funds, annuities, life insurance policies, and more recently, crypto assets.

00:05:42 Shanna Browning: And so that's what we're talking about when we say investment products right. Okay. All right. So because these products have investment risk, the FDIC role is to protect your deposits from the risk of the bank itself failing you. But it's not to protect you from market fluctuations.

00:06:01 Daniel Hill: Spot on. Got it. It's also worth noting the physical contents of a safe deposit box are not FDIC insured. Those are protected by our physical security, but they aren't covered and considered deposits.

00:06:15 Shanna Browning: Gotcha. So pretty. Crystal clear. So let's go to that lovely number that everyone knows when we talk about FDIC insurance. How much is actually covered?

00:06:27 Daniel Hill: Well, the standard FDIC insurance amount is two hundred and fifty thousand per depositor per insured bank for each account ownership category.

00:06:38 Shanna Browning: Okay, so let's break that down per depositor. Means per person. So if I have one hundred thousand in a savings account in my name alone, am I fully insured?

00:06:49 Daniel Hill: Correct. Now, per insured bank is also key. If you have accounts at two different banks, your coverage is separate in each. You'd have up to two hundred and fifty thousand in protection at both.

00:07:03 Shanna Browning: And that last part for each account ownership category is where I think people get actually even more coverage at a single bank. Can you explain that, Daniel?

00:07:14 Daniel Hill: Absolutely. The ownership category refers to how the account is titled. Most common are single accounts, joint accounts, and certain retirement accounts like IRAs.

00:07:26 Shanna Browning: Let's use this as an example. Say a husband and wife have a joint checking account at First Century Bank. How much of that is insured.

00:07:33 Daniel Hill: In a joint account? Each co-owner is insured for up to two hundred and fifty thousand. So for a husband and wife with one joint account, the account insured is a total of fifty or five hundred thousand dollars.

00:07:49 Shanna Browning: Oh, wow. I like that better than fifty. Mhm. So, um, also and what if they also have their own individual savings account at the same bank.

00:07:59 Daniel Hill: That's where the ownership category rule comes in. Okay. The husband's single savings account is a separate category, so it's insured for up to two hundred and fifty thousand. The wife's single account is also in a separate category insured for another two hundred and fifty thousand.

00:08:18 Shanna Browning: Okay. So that couple at our one bank could easily have over a million dollars in insured deposits just by structuring their accounts correctly.

00:08:29 Daniel Hill: That is a powerful level of protection I think a lot of people aren't aware of. And as we'll discuss in our tip, the FDIC has tools to help you verify this for your specific situation.

00:08:42 Shanna Browning: Okay, I feel better. I mean, I really feel better knowing that my money is safe. So now it's going to be time to put this knowledge to work with your this week's actionable tip.

00:08:57 Daniel Hill: Your action item for this week is to know your coverage. You don't have to guess about your FDIC insurance. You can get a definitive answer directly from the source.

00:09:09 Shanna Browning: The FDIC has a fantastic, easy to use online tool called the Electronic Deposit Insurance Estimator, or EDIE. Your task this week is to go to the official website at FDIC gov and find the EDIE tool.

00:09:33 Daniel Hill: We'll put the link in our show notes so you can find it easily. But this tool will walk you through a simple process. You'll input your bank, your account types, whether it's checking joint savings, IRA and the balances in those accounts.

00:09:48 Shanna Browning: So in about 90 seconds, the EDIE tool will give you a detailed report showing you that your funds are fully insured. And I'll be honest with you, it's the ultimate peace of mind.

00:10:00 Daniel Hill: The goal this week is to replace any lingering financial anxiety with certainty. Take two minutes. Use the editor tool and know for a fact that your hard earned money is safe.

00:10:12 Shanna Browning: And that's what this is all about, right? Getting answers from the people who know these topics inside and out.

00:10:17 Daniel Hill: Speaking of which, be sure to join us next week as we continue that theme. We'll be talking about a topic that can be a source of stress for many. Overdrafts. And we'll be joined by another one of our in-house experts, Amy Earl, to break it all down.

00:10:33 Shanna Browning: And you really don't want to miss her insights. So subscribe wherever you listen to your podcast. And thanks for tuning in. I'm Shanna Browning.

00:10:40 Daniel Hill: And I'm Daniel Hill. Go out and make some sense of your cents.