If you’ve been watching or reading finance-related websites or news companies, you may have heard about the collapse of the Silicon Valley Bank. SVB is the 16th largest bank in the US that provides a range of financial services to technology, life science, venture capital, and private equity firms.
With SVB’s collapse, companies like Roku and Roblox are greatly affected since their funds are tied to the said bank. And though US banks are insured by Federal Deposit Insurance Corporation (FDIC), the maximum coverage is $250,000 per depositor per insured bank. Since most of the SVB’s clients are start-up companies that have deposits of more than $250,000, most of the deposits (roughly 85%) are not insured.
Though the collapse of SVB may not have a direct impact on our financial system in the Philippines, the predicament of SVB’s clients can serve as an example of how depositors can protect themselves in case a bank fails.
So how do we protect our money?
1. Keep your money in a bank that is insured by the Philippine Deposit Insurance Corporation (PDIC)
PDIC provides deposit insurance to all member banks, which means that your money is protected up to a certain amount in case the bank fails or goes bankrupt. This is the Philippine equivalent of the US Federal Deposit Insurance Corporation (FDIC).
2. Split your money across different banks
It is not enough that you put your money in a bank that is PDIC-insured, it’s best to split it up into several banks.
Benefits of Multiple Bank Accounts
PDIC insurance coverage is limited per depositor per bank
PDIC provides insurance coverage of up to Php 500,000 per depositor per bank. So anything above 500K is not covered by PDIC insurance.
Splitting your money across different banks allows you to maximize your coverage and ensure that all your deposits are fully insured.
Diversification reduces risk
Since your money is spread out across multiple banks, you reduce the risk of losing all your money in case one of the banks fails.
Convenience and accessibility
Having accounts in multiple banks can also be convenient and accessible for you. You can allocate a specific bank account for emergency funds, one for regular expenses, and another for savings. This can help you budget and manage your finances more effectively.
Peace of mind
Knowing that your money is fully insured and spread across different banks can give you peace of mind and help you sleep better at night. You won’t have to worry about losing all your hard-earned savings in case of a bank failure.
Personal note
In addition to the recommendations above, it would also be best to put your money in high-yield savings accounts. This ensures that your money is not sleeping and the value doesn’t get eaten away by inflation.