How many accounts do distribute cash into

[MKKShah]

I am think of moving approximately $100K into high yielding savings accounts (mostly online accounts like ING/Ally). I am thinking of putting the money in equal sized chunks in 5 banks (that offer more or less the same yield). Does that sound reasonable?

With this money, capital preservation is the goal. I will be needing this in about a couple of years for some business ventures that I am planning. So I cannot afford to risk it in the stock market.

Does $20K per account sound reasonable? or is it too much to hold in an account?

(This might sound ironic, but the entire $100K is now in one account, and I don't feel too good about it, which is why I am making this move).

I understand that banks are insured by FDIC upto $100k (or $250K?), but I don't want to deal with them for all of my money in the event of bank failure.

[Kircheis]

The FDIC insures up to $250,000 for each account. You could actually have more than $250,000 at one bank if you have different types of account. For example, you can have $250,000 in an individual account and $250,000 in a joint account and you would be insured for $500,000. I would keep the $100,000 at one bank (the one with the highest interest).

[disneysteve]

I would keep it in as few places as necessary to not exceed the FDIC limit. Spreading it out doesn't make you any safer and just complicates bookkeeping.

[BuckyBadger]

I wouldn't spread it out. I think it MUCH more likely that you lose track of information or (god forbid) you pass away, that your heirs lose track of it than that you lose it because it's at one bank.

I prefer to have as few accounts as possible.

Is there a reason you're keeping that much cash in savings accounts? Unless you are going to use it all VERY soon I would get that money working FOR you rather than sitting around in a huge chunk.

[jpg7n16]

I am think of moving approximately $100K into high yielding savings accounts (mostly online accounts like ING/Ally). I am thinking of putting the money in equal sized chunks in 5 banks (that offer more or less the same yield). Does that sound reasonable?

No. You're covered on at least $250k per bank as others have pointed out.

5 accounts = all hassle, with no reward

With this money, capital preservation is the goal. I will be needing this in about a couple of years for some business ventures that I am planning. So I cannot afford to risk it in the stock market.

There is a wide range of investment options between cash and the stock market. What other options have you considered?

Does $20K per account sound reasonable?

No.

or is it too much to hold in an account?

No.

I understand that banks are insured by FDIC upto $100k (or $250K?), but I don't want to deal with them for all of my money in the event of bank failure.

I don't understand this statement. "I understand that I'm protected against bank failure, but I'm scared of bank failure" ??

From: FDIC: FDIC Consumer News Spring 2006

Misconception Number 3: If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.

This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.

The truth is that federal law requires the FDIC to pay the insured deposits "as soon as possible" after an insured bank fails. Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.

How to cover even more than the $250k "limit":
FDIC: Your Insured Deposits

[MonkeyMama]

I would personally keep in *two* savings accounts (is what I do). It is a valid concern to have your money readily available in case of bank failure. Though is only a short-term concern while the FDIC is straightened out.

What we generally do is keep a small sum at our local bank (mostly in a checking account - whatever we need in the next 30 days and in a pinch - so maybe plus $1000). Then keep everything else in two online savings accounts. The bulk is in the higher yield account.

Basically, every time we chase a higher rate, we keep the last account open. There is more to this strategy - keeps us from closing all our accounts and moving over when an interest rates turns out to be a short-term promotion. So we generally just have 2 online savings account at any given point in time.

Having 5 bank accounts is a headache reserved for when you have $1 million + in cash. You would only want to keep cash up to FDIC insurance, at any one bank.

[BuckyBadger]

Having 5 bank accounts is a headache reserved for when you have $1 million + in cash. You would only want to keep cash up to FDIC insurance, at any one bank.

I could be wrong, but I believe that it's per account, not per bank. So if you had two savings accounts you could have $250000 in both of them and still be covered.

[MKKShah]

There is a wide range of investment options between cash and the stock market. What other options have you considered?

Unfortunately, I haven't considered any options at all. Do you have any recommendations?

[disneysteve]

I could be wrong, but I believe that it's per account, not per bank. So if you had two savings accounts you could have $250000 in both of them and still be covered.

I believe it depends how the accounts are titled. They need to be different.

So you could have:

Account 1: John Smith
Account 2: John Smith and Jane Smith
Account 3: Jane Smith

That would get you 3 times the FDIC coverage. If all 3 accounts were just in John Smith's name, that wouldn't work.

[jpg7n16]

I could be wrong, but I believe that it's per account, not per bank. So if you had two savings accounts you could have $250000 in both of them and still be covered.

Not correct. The $250k is per registration, per bank. See link at the bottom of my post above for how to have more than $250k at one bank.

If you have a individual account at BofA and another at Wells Fargo, each is covered up to $250k.

Reposting link for convenience: FDIC: Your Insured Deposits

Unfortunately, I haven't considered any options at all. Do you have any recommendations?

CDs, treasuries, agency bonds, corporate bonds, bond funds, muni bonds, muni bond funds, short term bond funds, TIPs, Series I Savings bonds -- all can be used for excess cash holdings, can yield more than cash, and none have any ties to the stock market.

[Joan.of.the.Arch]

I guess "past performance is no guarantee of future performance" may be applicable to bank failures, too, but I am amazed at how quickly bank closures are dealt with. Banks seem to be taken over on a Friday, and then by Monday customers are able to get their insured money!

So unless there is widespread bank failure, I doubt your money is going to get bottled up long at all even if you do have an account in the failed bank.

My spouse and I have 3 accounts at three banks. Two are for the high interest which is only earned up to a certain deposit amount, well below FDIC guaranteed amounts. The third is to be able to make e-transactions smoothly and quickly without charge.

Oh, is PayPal a bank? If so I guess we have four accounts.

[bUU]

While there is some logic in having cash available in two places (in case one bank fails, you still have access to cash through the other while FDIC works things out), that's the extent of the logic, as far as I can see. I have no confidence that anyone actually should be holding onto more than $250k in cash, much less $500k (if you do split between two banks).

Also keep in mind that many banks reward you for concentrating your money with them. One bank I'm moving away from offers 0.4% interest, unless you have a high balance (over $50k I think) at which point the interest jumps to 0.8% interest. Be sure to max-out such advantages.

If I was choosing a high-interest deposit account now, I'd probably select Ally Bank. I currently have most of our cash at ING Direct, and simply don't feel motivated to move to Ally for $150 extra in interest a year (and a whole mess of grief from my wife for moving the money yet again - there is a substantial cost to chasing the best arrangements that shouldn't be discounted). We also have our day-to-day checking account at Fidelity, so we're "protected" for the short period we wouldn't have access to ING Direct funds, should Capital One go under.