Is It Time To Worry About Your Money, Your Bank, Or The U.S. Banking System? 

Despite the financial crisis of 2008, bank failures are still very uncommon.

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Nonetheless, many customers are worried about their deposits, their bank, and the American banking system as a result of the sudden closures of Silicon Valley Bank and Signature Bank.

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President Joseph Biden stated on Monday that "every Citizen should feel sure that their savings will be there when and if they need them" in a speech meant to allay concerns as the U.S. United States, the Federal Reserve, and the Federal Deposit Insurance Corp. In order to stop a wider contagion, the Department of the Treasury moved immediately.

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But, recent occurrences have revived previous concerns about how secure your money is at the bank. Here, experts explain what a run on the banks is, how the FDIC insures deposits, and whether or not your money is still safe.

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Describe a bank run.

As banks invest the money that consumers deposit, there isn't always cash on hand.

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Tomas Philipson, a professor in public policy studies at the University of Chicago and a former assistant chair of the White House Council of Economic Advisers, said that when everyone wants to withdraw money at once, the bank doesn't have the reserve to do so and they essentially go out of business.

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Customers would often race to the bank in a panic, according to Philipson. It now occurs electronically. Bank runs are now faster than ever since computerized transactions are carried out quickly; in the instance of SVB, they lasted an exhausting 48 hours.

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There are other middle sized banks that may be vulnerable to significant withdrawals, notwithstanding the fact that SVB likewise had an abnormally high proportion of uninsured deposits.

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Might this occur at different banks?

The short answer is "maybe," according to Stacy Francis, a licensed financial planner and the president and CEO of Francis Financial in New York. She belongs to the CNBC Financial Advisor Council as well.

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Francis stated that the Federal Reserve's sudden increase in interest rates is a contributing factor in what is taking place.

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According to her, banks presently hold long-term bonds with low interest rates. Less money is coming in than is going out when the interest that banks are earning on such longer-term bonds is higher than the rate of interest they're offering customers on their savings accounts.

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Also, "many institutions are experiencing huge withdrawals from money depositors who are searching [for higher rates] to make more money," Francis continued. "All of this is stressful."

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How is the cash at my bank doing?

The FDIC, which protects banks, covers your funds up to $250,000 per creditor.

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Since the FDIC's founding in 1933, no creditor has ever experienced a loss of funds because a bank failed.

If your cash balance is below the FDIC coverage threshold, Carolyn McClanahan, a CFP and the founder of Life Planning Partners in Jacksonville, Florida, advised against using concern minutes.

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The government has very quick procedures to get you back to using your money in no time, according to McClanahan, who is additionally a member of the CNBC Financial Adviser Council. "You may have to go without access for a short period of time," he said.

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She cautioned that if you have deposits totaling more than $250,000 at a single bank, you might want to speak with a private banker there or divide your funds among accounts at various financial institutions.

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Moving some to a trading account and using investment products that are engaged in government-backed assets are other options, she continued. Following a number of rate increases from the Fed, some Treasury bills, or T-bills, are now earning 5%.

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What has changed from 2008?

Jude Boudreaux, a CFP and senior financial adviser at The Planning Center in New Orleans, said: "This doesn't look like a financial crisis, yet. Boudreaux is a member of the Advisor Council for Trade Algo.

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He pointed out that the two banks under discussion "specialized in riskier assets," specifically cryptocurrencies and software companies. "It seems unlikely that this would spark a nationwide bank crisis."

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When customers stopped paying their mortgages in 2008 as a result of reckless lending, the largest banks in the nation were left holding trillions of dollars in almost worthless investments.

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Due to new regulations put in place during the financial crisis, like as increased capital requirements and yearly stress tests, those institutions are now in a stronger position.

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