How safe is my money in the bank?

Amidst the recent news surrounding the high-profile setbacks at Silicon Valley Bank and Credit Suisse, you might find yourself wondering, “Is my money safe  in the bank?”

It is important to note that the banks in question faced some unique challenges, which currently do not appear to be affecting the larger systemic banks. In both cases, losses were shouldered by bond and equity holders, or there were forced mergers with other banks leaving deposits unscathed. Nonetheless, it is always worth revisiting the laws and regulations safeguarding your cash.

FSCS Protection: Your Financial Safety Net

The Financial Services Compensation Scheme (FSCS) acts as a protective buffer for your finances. This UK-government-backed initiative offers compensation if a financial service provider, such as your bank, collapses. The FSCS extends coverage to various financial products, encompassing bank deposits, investments, and insurance policies.

For cash deposits, FSCS protection is capped at £85,000 per individual, per financial institution. For instance, if you hold two accounts at ABC bank, one with £100,000 and another with £50,000, the FSCS covers £85,000 in total, leaving £65,000 potentially vulnerable in the unlikely event of a failure. As a depositor, you are effectively lending money to your bank; thus, if the bank defaults, it may struggle to repay these loans. To ensure your money’s safety, it’s important to be aware of this limit and spread your cash across various banks or building societies as needed. By doing so, your finances will be fully protected in case something goes wrong with your bank.

National Savings and Investments: As safe as it gets

National Savings and Investments (NS&I) serves as the UK’s financial superhero. This government-supported organization offers an array of products, including Premium Bonds, Income Bonds, and Direct Saver accounts. The cherry on top? Your money is entirely secure with NS&I, as it is backed by a 100% guarantee from HM Treasury. You can invest up to £5 million per person across all product offerings.

NS&I products not only safeguard your money but also provide competitive interest rates and tax-free returns on select products, making them an attractive option for savers and investors.

For higher amounts, then it’s worth exploring investments in short dated government bonds or money market funds.

So, how safe is your money in the bank? As long as you’re aware of the FSCS protection limits and take advantage of National Savings and Investments, your money is well-protected. Keep a close eye on your cash, spread it across different banks if needed, and consider investing in NS&I products.

If you ever have questions or need some guidance, don’t hesitate to get in touch. Stay safe and happy saving!

  • The value of investments may go down as well as up and you may get back less than you invest.
  • This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

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