Why Your Money Isn't Safe In Your Bank Account

Summary

This video explores the safety of keeping money in a bank, highlighting the risks and protections in place. It covers the history of banking, from ancient merchants to modern financial systems, and the role of insurance like the FDIC in safeguarding deposits. The video addresses the potential dangers, including the risk of bank failure, security breaches, and technical glitches leading to missing funds. It also discusses strategies to protect large amounts of money and the importance of ensuring your bank is insured. The sponsor, Dashlane, is introduced as a solution for securing online passwords and financial information.

Takeaways

• 😀 The first banks originated from merchants in the old world, who provided grain loans to farmers and traders.
• 😀 Ancient Greece and the Roman Empire had money lenders and changers, often operating in temples.
• 😀 Modern banking began in the 14th century, with Italians, Dutch, and British leading the way.
• 😀 The Banca Monte dei Paschi di Siena, founded in 1472, is the oldest bank in the world.
• 😀 Bank accounts in the U.S. are insured by the FDIC up to $250,000, offering protection for most account holders.
• 😀 If a bank fails and you have over $250,000 in your account, you could lose the excess amount unless you spread it across multiple insured banks.
• 😀 Bank runs occur when customers panic and withdraw their funds, often leading to the bank’s collapse.
• 😀 If a bank is taken over, your loan is transferred to the acquiring institution, but it does not disappear.
• 😀 While FDIC insurance is strong, it does not cover items in safety deposit boxes or certain forms of theft.
• 😀 Countries like Australia offer similar bank insurance, but limits apply, and large amounts may not be fully covered.
• 😀 Some countries do not have strong safety nets, as seen with the Bank of Cyprus collapse, where people lost up to 47.5% of savings over a certain amount.

Q & A

Why were merchants in the ancient world considered the first banks?

In the ancient world, merchants acted as the first banks by providing grain loans to farmers or traders, essentially offering financial services like lending.

What role did money lenders and money changers play in ancient Greece and Rome?

In ancient Greece and Rome, money lenders and money changers facilitated the exchange of currency and provided loans, often operating within temples and playing a central role in the economy.

When did modern banking institutions begin to emerge?

Modern banking institutions began to emerge in the 14th century, initially led by the Italians, followed by the Dutch and the British, eventually shaping today's banking systems.

What is the oldest bank in the world?

The oldest bank in the world is Banca Monte dei Paschi di Siena in Italy, which opened in 1472.

What happens if a bank fails and the deposits are not insured?

If a bank fails and deposits are not insured, there is a risk of losing the money. However, in most cases, banks are insured to protect depositors.

How much of your money is insured by the FDIC in the U.S.?

In the U.S., the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder per bank.

What should you do if you have more than $250,000 in a bank account?

If you have more than $250,000 in a bank account, it's advised to spread your money across multiple FDIC-insured banks to ensure full protection.

What is a 'Bank Run,' and why does it occur?

A 'Bank Run' occurs when large numbers of customers withdraw their money from a bank at the same time, usually due to fear that the bank is about to collapse, which can overwhelm the bank's available funds.

What kind of insurance protects your money from theft or fraud?

Most banks offer a 'banker's blanket bond' that covers theft and fraud. If an account is hacked, the FDIC may provide coverage under the Electronic Funds Transfer Act, depending on the circumstances.

Can a bank's system malfunction and cause your money to disappear?

Yes, there have been instances where technical glitches or errors in bank systems have caused money to disappear, though in most cases, the issue is eventually resolved and funds are returned to customers.

What happened to depositors in the Bank of Cyprus during its collapse?

During the collapse of the Bank of Cyprus in 2013, depositors lost 47.5% of any savings over $132,000, demonstrating the risks associated with banking in certain countries.

What additional risks do depositors face in countries without robust banking safety nets?

In countries without strong banking safety nets, depositors face higher risks, as they might not have access to protections like the FDIC in the U.S. This can lead to substantial losses if a bank collapses.