If there is ONE single piece of personal financial advice I give to people, it is to never ever keep all your money in one place. I know it’s a hassle to to manage multiple bank accounts but the consequences of keeping all your money in one bank account are too dire and brutal.
Yotta Bank
I wasn’t aware of the story or saga of “Yotta Bank” but I learned about it when I came across this YouTube video which I would encourage you to watch in its entirety. Throughout various parts of the video, several people who invested in Yotta Bank speak about the impact of having their funds frozen.
FDIC?
The interesting thing about the video if you don’t watch it is that the funds in question are FDIC insured however FDIC only kicks in during a bank failure and not when the bank is “frozen” due to “errors” and “technical issues” so people are stuck unable to withdraw funds.
Personal Story
About 20 years ago, I was at work when a co-worker came in with a panicked stressed demeanor. I asked her what was wrong and she said her bank had frozen all of her accounts due to fraud and she had no access to her debit, credit, and bank accounts. She had all of her banking eggs in one basket and now she was locked out. A few people in the office ended helping her out with rent, short term groceries and other expenses until her situation got sorted out which took almost a month.
Since that day, I have always kept my money in multiple bank accounts. My paycheck, for example, is split and direct deposited into three different bank accounts. I have three main brokerage accounts for my investments and a few smaller ones too. I also have 3 additional credit union bank accounts. For credit cards, I have cards from different banks and networks such as Amex, Mastercard, Discover, and Visa.
Scams, Fraud, Hacking, and Stupidity
There is now an endless proliferation of scams, fraud, hacking and overall general stupidity often linked to greed by both scammers and consumers and the best way to protect yourself is due diligence and diversification because sooner or later I think we all will get scammed or hacked in some way shape or form.
Sadly, I’ve had my kids and even sibling tell me about some great new bank offering a high yield or cool technology that I should try out. In almost every instance of investigating the institution I have found issues that would keep me from putting my money there. If you don’t know how to conduct due diligence then you should probably learn or avoid investing in something you don’t understand.
Probably the best metric for the safety of an institution is how long it’s been in business but even that doesn’t work well when you consider the failures of Lehman Brothers, Bear Sterns and others over the past few years.
This brings me back to the best possible thing to do with your money is to diversify your banking institutions the same way you would diversify your stock or bond portfolio.
Don’t put all your eggs in one basket!
Share The Wealth
Have you had your funds frozen? If so, what are you doing now to make sure you can recover from it quickly?