Q: Between the financial crisis a few years ago and all the talk about the dollar falling now, I'm getting nervous about my bank accounts. I have some money market accounts and CDs, but I'm wondering if there is a safer place for my money -- perhaps gold?
A: The difficulties of the past few years haven't just raised concerns about jobs and economic growth the way recessions usually do -- they've made people worry about the basic stability of the financial system. Some nervousness is understandable, but before you cash in your money market accounts and CDs, there are a couple things to bear in mind:
- Your deposits should be safe as long as you are within FDIC insurance limits. The limit is generally $250,000 per depositor per bank, but if you can get more coverage by diversifying among banks, or if some of your deposits are in joint accounts or IRAs. If things got to the point of collapse where the US government could no longer fulfill its responsibilities to depositors, it's hard to see an alternative that would be safe anyway.
- Gold is hardly the safe harbor people take it for. Certainly, gold is a radically different investment than deposit accounts, so it shouldn't really be considered as a safe alternative. Gold can fluctuate widely in value, and it pays no interest. Gold has been hot for several years now, which should make you wary about jumping in at current prices. Even if gold just flattens out, without income it becomes dead money, losing ground to inflation. With the best money market rates above 1.5 percent, and the best CD rates around 3 percent if you are willing to go long, you could do better by sticking with deposit accounts.
In short, if you are worried about the financial system and the economy, FDIC-insured deposits are probably the safest place for your money.
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