Weeks before Lehman Brothers went bust on September 15, 2008, I decided to spread my savings out to various banks to hedge against risk. As you may recall, Bear Sterns was taken under that Spring and Washington Mutual was also in deep trouble and eventually gobbled up by Chase.
Now that my 5-year CDs have expired with First Republic Bank, I’ve begun consolidating my assets with Citibank to make things easier to manage. I’ve been with Citibank for the past 14 years. There is now risk I will lose some of my money given the amount is above the FDIC insurance coverage of $250K/$500k for singles and married couples, but I also don’t think there’s any chance in hell Citibank goes under now, especially since tier 1 capital ratios are now much higher as mandated by law. Besides, the economy is much stronger than it was five years ago.
Another reason why I’m not worried is because concentrating this amount of savings with one bank is only temporary. I know I’ll be putting a hefty downpayment on a property this year. Furthermore, I’ll be spending a good chunk of change on remodeling, which will bring my liquid savings down to a minimal amount again.
I think it’s a good idea for everybody to shoot to have $250,000 in assets with one bank. $250,000 in assets includes savings, CDs, or investments. Based on my experience, once you’re at the $250,000 asset mark or higher, I’ve noticed banks start treating you much better. If you have significantly more assets than $250,000, then I suggest having at least one other bank for convenience and safety. For example, I hate paying $3 ATM fees, so by having money spread across two major banks, the chances of me paying ATM fees goes down significantly.