Are Banks no longer a Safe Place for our Money?

On a news broadcast recently, a man was seen coming out of his bank with a shoebox filled with his life's savings. Indeed, the sub-prime mortgage pandemic has caused rampant home foreclosures. But not only so; it's also responsible for the values of stock markets around the world tumbling through the floor, and banks everywhere not only lack enough liquidity to loan money to each other money, they've also virtually cut off all loans to individuals as well. It's no wonder that this man decided to withdraw all his money. But is doing so an appropriate response in dealing with this economic crisis?

Understandably, almost everyone affected by this crisis is frightened to some degree. However, taking all of one's savings out of the bank is probably not the best answer. Consider for a moment, if you will, that if we all went to our local banks and withdrew our money, those financial institutions would have no alternative but to either shut down completely or ask the Federal Government for assistance. In other words, there would be cries for additional bailouts.

If you have $250,000 or less in a checking-, savings- or Certificate of Deposit account, your money is still insured by the FDIC. This increase from the previous limit of $100,000 was part of the economic rescue plan signed into U.S. law in the latter half of 2008. Furthermore, throughout the world, billions upon billions of dollars worth of currency is currently being infused by governments into banks to increase the liquidity that was frozen by an avalanche of bad mortgage accounts.

Let's be honest; many of our hometown financial situations are in trouble. And, with hundreds of thousands of jobs already lost thus far, an increasing number of households can no longer adhere to their budget, making this an increasingly difficult storm to weather. Even the largest, stalwart companies have felt the enormous pressure. General Motors recently laid off thousands of workers and is now conducting talks with Chrysler Corporation regarding the possibility of a merger. Unemployment continues to rise, as does the cost of virtually everything needed to live. As a result, retail sales have fallen and businesses, banks, dealerships and just about everyone else has little choice but to tighten their financial belts.

Yes, it's completely understandable why some would want to 'take their money and run' from the banks, but we must not dismiss the potential consequences of such a drastic act. There's no need for panic at this time. Our money is still safe and guaranteed in our local banks. So, don't throw caution to the wind. Sit down with your entire household and discuss how the economic situation affects your finances. Explain it in simple terms to your children so that they'll not become frightened if they hear talk from other adults or among their peers. Take the time to ease their concerns. It may take a while and it will take discipline and some sacrifice, but we'll get through it – and we'll be stronger afterwards.