Bank Collapses for Dummies. Is Your Money Safe?
You may have heard in the news recently about the Silicon Valley Bank collapse.
Here is a simple explanation with stories so anyone can understand why it collapsed. Could this happen to our Canadian banks?
In my latest YouTube video and podcast episode, you’ll learn all about bank collapses and the best way to protect your money.
- Three reasons why Silicon Valley Bank collapsed.
- 1980s story showing how matching maturities works.
- Beverly Hillbillies explain why no bank is safe.
- How social media makes your bank less safe.
- What is a “bank run”?
- Wisdom from the musical “Hamilton” that Silicon Valley Bank didn’t follow.
- Can CDIC make your money safe?
- Can government regulations make your money safe?
- What are “capital requirements” and do they make your money safe?
- Is your money safe in a Canadian bank?
- Have Canadian banks failed?
- Understanding different kinds of risks.
I hope you enjoy it!
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I’m glad you found it useful.
Your insight is right on. The banks hope you will leave $4,000 in your account at all times to get the free bank account. If lots of people leave them extra money, they can lend out 90% of it.
In most cases, it’s not worthwhile for you. That $4,000 could be contributed to an RRSP or TFSA and invested in equities to get tax benefits plus 8-12%/year returns. That should be a far bigger benefit to you than a free bank account to save $16.95/month in fees.
I learned a lot and I really liked the example for inflation and interest rates. 30 years ago I had enough money to buy two cars. I invested it in bonds and today I have enough money to buy one car. Whoops.
I also had a bit of a revelation with banks fees. Since banks use 90% of deposits for investing it’s no wonder I either have to have $4,000 on deposit or pay $16.95 / month (which works out to about a 5% return for the banks).