Should I pull my money out of the bank?

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I have had a few people ask me if they should pull their money from the bank. Since it seems to be a thought that is crossing some peoples minds, I thought I would give my 2 cents about it.

I am not pulling my money out of my bank or credit union. Here is my logic for my decision…

The $700 Billion dollar bailout is going to create high levels of inflation in the U.S. It may be a little while before the everyday consumer sees it, but just like shooting a rifle into the air, the bullets will hit the ground at some point. Money sitting under your mattress is constantly losing value (read the effects of inflation). At current inflation rates, a high-interest savings account or a CD may keep your spending power about level.

As far as the banks going belly up, that is more of a legitimate concern than it has been in a while. After the Great Depression FDIC insurance was created to put American’s minds at ease and keep them from running to the bank to pull all of their money out. So, if the bank does happen to go under, your accounts will be insured up to $250,000 (just recently changed from $100,000) by the Federal Government. But, as you may have seen in the news, it is a lot more likely for another bank to try to buy them out, rather than the bank going under.

In the long-term, I think the US has to make some major changes to their monetary policy if we are going to continue to be the strong nation that we have been. But, in the shorter term (a year or two) I think we are going to come out of this, just like we have all the other recessions (or even depressions). Check the history of recessions for some encouraging data about the length of and what happens after recessions in the past.

To add to this, I am trying to scrape up some extra cash to invest. You may have noticed that Warren Buffett has been making some purchases lately. After reading quite a few books about Warren, I can tell you that he is extremely wise and timely with his investments. He very rarely buys unless he finds a deal. The panic in the markets is causing a lot of stocks to be undervalued and he is taking advantage of the lower prices because he knows that they will bounce back. I share his sentiment.

What do you think – am I being overly optimistic?

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  1. Curt

    I agree. But, I also have money in three different banks and they are all local banks, verses national banks.

    That way if one of them is in trouble I will be able to continue managing my household expenses at one of my other banks.

  2. MInTheGap

    Diversification seems like a good idea, but I’m not sure about investing. Seems like this is an even more riskier time than normal. I’ll definitely be socking more into the Emergency Fund, though.

  3. Jay Peroni

    The more people panic, the greater the bargains will be. Warren Buffett says it best,”market downturns are simply the impatient selling their stocks to the patient.” Taking your money out of the market is unwise. Likewise taking money out of your bank is not the prudent thing to do. God is in control. The storm will calm soon. Keep the faith!

    Jay Peroni, CFP
    Author of The Faith-Based Millionaire

  4. Success Professor

    I think you give very good advice. Actually, in one place I think you are too pessimistic: about inflation. The economy is so bad, that it is very unlikely that the bailout is going to add significantly to inflation. Many futures markets are pointing towards lower inflation numbers not higher, and I agree.

  5. bob

    I agree – I am looking for bargains myself…

    I hope you are right about inflation. I have heard mixed things, but some people are really thinking we are going to hit record levels of inflation over the next couple years… I guess time will tell…

  6. Chris Gardner

    Look, economic recovery is not a guarantee. Welcome to the very end times. Some of you say that God is in control and everything will calm down soon. God is defiinitately in control and He will never leave you, but do remember the path is narrow and there will be some very trying times ahead of us. Sure there have been recessions/depressions before and we have always recovered, but which one is the one that we don’t recover from and your left standing holding on the only thing that you have, and that’s hopefully God, until Jesus returns?! I am not saying that this one is it, but be prepared for that time. God should be in control of your money and the decisions you make regarding it, not Warren Buffet.
    Psalm 9:8 He shall judge the world in righteousness, He shall minister judgment to the people in uprightness.
    Psalm 9:17 The wicked shall be turned into hell & All the NATIONS that forgot God.
    Psalm 9:20 Put them in fear O Lord that the nations may know themselves to be but men. Selah.
    Hang on boys and girls and make sure that your roots are deep in the Word b/c it’s going to be a hard and wild ride. GOD bless you all and remember what your focus should be.