Saving through a financial institution such as a bank is a safe and secure way to build your financial nest. Yet sometimes, the institutions that should protect your investment fail or go bankrupt. This is one of the main reasons you should save with an FDIC-insured institution. Here’s an easy guide on how to build your savings.
Why Save with FDIC-Insured Institutions?
The Federal Deposits Insurance Corporation (FDIC) requires all institutions it insures to disclose detailed financial information called Call Reports. Therefore, when you save with an FDIC-insured institution, your funds and financial products, such as checking and savings accounts, are protected should the bank fail.
The Federal Deposits Insurance Corporation is an almost century-old government institution mandated with protecting specified financial products from bank failure. It was created following mass bank closures that left clients at a loss, confused, and with no way to regain their hard-earned money.
Saving with an FDIC-insured institution is also a safe option because FDIC examines and supervises financial institutions to protect consumers from issues such as fraud. This is a protective strategy considering how many businesses lose money through fraud. The Association of Certified Fraud Examiners states that businesses lose about 5% of revenue to fraud yearly.
Four Ways to Build Your Savings With an FDIC-Insured Institution
Before choosing a savings plan, it’s best to check what products FDIC insures on their website. The FDIC doesn’t cover products such as stocks and crypto assets. So, you’ll have to choose products such as checking and saving accounts or money market deposit accounts (MMDA). Here are four tips you can use to build your savings.
1. Save Today, Even if It’s Little
Saving for a rainy day is a prudent strategy for achieving financial security. Instead of using the extra $50 after your budget formulation, save it. Consistently saving even small amounts will build up your savings. In addition, accounts such as MMDAs give you good interest over time. Every dollar you save might be worth more than today’s worth the following year.
2. Save First, Then Pay Other Bills
Saving can be challenging, especially with competing bills. Therefore, get into a habit of saving a percentage of your income, then settling your bills. You can give your FDIC-insured bank or financial institution a standing order to deduct a specific amount once it enters your account, so you’re less tempted to use it.
3. Plan for Your Taxes
Safe saving plans should comply with tax laws. However, there are legal ways to avoid taxes, such as inheritance. According to HSBC, 74% of working people globally intend to leave an inheritance for their children. FDIC-insured institutions ensure your savings and transactions are tax-compliant. You can rest assured that your savings won’t go down the drain due to heavy fines for failure to streamline your tax records.
4. Reduce Spending on Unnecessary Items
Investing, not reducing spending, is a better strategy for increasing your available cash. However, small changes in your spending can save you an extra amount that can go to your savings account. For example, you can opt to bike to work and save on transportation expenditures.
Questions You May Ask
1. How Will I Know if an Institution Is FDIC-Insured?
You can use the ‘Name and Location’ search inquiry to find FDIC-insured banking institutions around you. Alternatively, call the FDIC at (877) 275-3342.
2. What Happens if My Financial Institution Fails?
The FDIC will cover the balance in your deposit account, dollar-for-dollar, up to your insurance limit.
3. How Much Can I expect in Insurance Claims?
The FDIC gives a standard $250,000 for each depositor account.
4. Should I Apply for FDIC Insurance?
No, you don’t have to apply for FDIC insurance since their coverage applies automatically as long as you’re in an FDIC-insured institution and your chosen financial product is covered by the FDIC.
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