What is FDIC Insurance Anyways?

The news cycle shifts rapidly as news breaks and attention spans dwindle, but a reoccurring theme over the last few months has been FDIC Insurance. Much has been made to do about Silicon Valley Bank and others running low on funds, but there really isn't anything to fear from a consumer standpoint about your hard-earned cash going away with the bank.

In an ever-changing financial landscape, ensuring the security of your hard-earned money is paramount - we absolutely believe so. The Federal Deposit Insurance Corporation (FDIC) plays a crucial role in maintaining the stability of the banking system and protecting depositors' funds. In this blog post, we will explore FDIC insurance, its history, how it works, and why it is essential for your financial well-being.

The History of FDIC Insurance

Since its inception in 1933, the FDIC has been a cornerstone of confidence in the banking sector. The Great Depression of the 1930s witnessed widespread bank failures and massive loss of public trust. In response, the U.S. government established the FDIC to restore faith in the banking system and safeguard depositors' funds. President Franklin D. Roosevelt signed the Banking Act of 1933, which created the FDIC, providing stability and reassurance to depositors across the nation.

Understanding FDIC Insurance Coverage

FDIC insurance protects depositors against the loss of their funds in the event of a bank failure. Here are the key aspects of FDIC insurance coverage:

• Deposit Limits: The FDIC insures deposits in participating banks up to $250,000 per depositor, per account category. Account categories include single accounts, joint accounts, retirement accounts, and revocable trust accounts. Understanding these categories is important to maximize your coverage.
• Types of Insured Accounts: FDIC insurance covers a wide range of deposit accounts, including checking accounts, savings accounts, certificates of deposit (CDs), and money market accounts. Whether you have a single account or multiple accounts across different banks, the FDIC protects your deposits, providing peace of mind.
• Non-Insured Deposits: It's crucial to be aware that not all banking products are covered by FDIC insurance. Investments such as stocks, bonds, mutual funds, annuities, and insurance policies are not protected by the FDIC. Be mindful of the distinction between insured and non-insured products to make informed financial decisions.

The Importance of FDIC Insurance

FDIC insurance plays a vital role in maintaining confidence in the banking system and protecting consumers. Here are three key reasons why FDIC insurance is crucial:

• Stability and Security: FDIC insurance ensures the stability of the banking system, promoting trust among depositors. Knowing that their deposits are protected up to the insurance limit, individuals are more likely to keep their money in banks, fostering economic stability and growth.
• Accessibility and Inclusion: FDIC insurance provides access to financial services for individuals and communities who might otherwise be reluctant to participate in the banking system. By safeguarding deposits, the FDIC encourages a more inclusive financial environment, where everyone has an opportunity to save, grow their wealth, and participate in economic activities.
• Consumer Confidence: FDIC insurance instills confidence in consumers, allowing them to focus on their financial goals without the fear of losing their hard-earned money. This confidence extends beyond depositors to the broader economy, as a strong and secure banking system fuels economic progress.

Bottom Line

In a world where financial security is of paramount importance, the FDIC plays a vital role in protecting depositors and maintaining stability in the banking sector. Understanding the history and functioning of FDIC insurance is crucial for individuals seeking to safeguard their hard-earned money. By providing coverage, promoting stability, and fostering inclusivity, the FDIC ensures that consumers can confidently save, invest, and participate in the financial system. So, next time you entrust your money to a bank, remember the invaluable protection offered by FDIC insurance.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Sound Foundation Wealth Advisors, and Cambridge Investment Research, Inc. are not affiliated.