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The collapse of Silicone Valley Bank and Signature Bank scared a lot of people — and, in some ways, rightfully so.
News of impending doom caused a bank run, after which regulators stepped in to try to protect the failing banks. Many of the banks’ clients grew worried that they wouldn’t get their money back, but these recent bank failures also triggered more general questions among many.
Can banks “steal” your money during an economic collapse? Is that about to happen now that we’re likely headed into a recession? Is it time to withdraw all your money from the bank and stuff cash under your mattress instead?
They’re all valid questions. It’s important to stay calm, however. We can only make informed and logical decisions from a place of relative inner peace, after all.
Can Banks ‘Steal’ Your Money When They Collapse?
If, by “stealing,” you mean you don’t get your money back, the answer is sometimes “yes.”
It’s happened several times in the past. The Great Depression is a great early example. Many people lost everything, all their savings, when banks came crashing down. Unfortunately, there are also more recent examples. In 2013, some Cyprus-based banks failed. Despite the fact that increased protections had been implemented since the Great Depression, some investors lost a lot.
Should you be worried that you’ll lose your money after what happened with Silicone Valley Bank? That depends:
Almost all banks in the United States are insured through the so-called Federal Deposit Insurance Corp. You’re safe if you have $250,000 or less in a bank when it fails. Insurance will cover your loss unless the Federal Deposit Insurance Corp also fails.
If you’re with a credit union, check if it’s insured by the National Credit Union Administration. All federal credit unions are, and the same amount is covered in these cases.
In practice, that means you’ll likely lose every cent over $250,000 that you may have in the bank if it were to fail. Most people don’t have that much. Those with less will likely face some headaches and red tape while they try to retrieve their funds.
It would take a bankrupt government for these fail-safes to fail.
Great. Does That Mean I’m Safe?
Failing banks are scary. Even though most people will be able to retrieve all of their lost funds if a bank collapses, diversifying your assets is always a good idea.
Physical assets like gold and other precious metals can give you access to a store of wealth that’s completely independent from the traditional financial system. If, as preparedness-minded individuals say, the “end of the world as we know it” were to come about, precious metals would almost certainly retain their value.
The reasons for investing in gold and precious metals go far beyond preparing for the end, however. Investors seeking opportunities can invest in gold and other precious metals to:
Hedge against inflation, as gold and precious metals are considered safe-haven assets that will survive almost anything with their value intact.
Diversify your portfolio. Diversifying is the golden rule of investment, and adding gold and other precious metals to your portfolio is a key way to reduce risk through diversification.
Gain liquid assets. Storing physical gold in your home can be a safe choice. Cash can devalue and burn. Other assets can lose their value, as well. Gold bars are recognized as valuable everywhere, at any time, and they are also portable.
Preserve your wealth. Gold has kept its value over the course of decades. Despite constant fluctuations, the value of gold has steadily risen in the long term. Other precious metals like silver, platinum, and palladium show similar trends.
Making a profit. Smart investors can use precious metals as a way to turn a handsome profit. Not everything is about preparing for the worst — you can also use precious metals to prepare for the best.
Alongside other physical investments, like real estate, precious metals are one way to increase your financial stability and enjoy a comfortable life. That’s true regardless of what else may be going on in the world.
In conclusion, failing banks likely won’t “steal” (be unable to return) your money unless you have more than $250,000 in your accounts. That’s no reason to depend on them to store all your wealth, however. Alternative asset classes can give you a level of independence that banks cannot, in the good times and the bad.