or you don ’ t have access to your checking accounts , bills in a variety of denominations will allow you to purchase food , gas or other supplies .”
Berlin recommends having at least $ 100 per person ready for such crises . Sometimes this can be augmented on relatively short notice , perhaps if you ’ re warned of an impending snowstorm or hurricane . “ If extreme weather is forecasted for your area , it may make sense to keep some cash available in a safe place , the same way people prepare by stocking up on food and other necessities ,” says Ken Van Leeuwen , founder and managing director of Van Leeuwen & Co . in Princeton , N . J .
Other advisors go further , favoring the crypto markets . “ More and more people are using cryptocurrency ,” says Yon Perullo , CEO of RiXtrema , a Bend , Ore . -based provider of financial planning software .
Bitcoin , Ethereum , Litecoin and the like are volatile , of course , and no one should depend entirely on this non-paper money . But “ some amount could be a good idea ,” Perullo says . “ The promise of crypto has always been the ability to have money held away from central banking systems .”
Besides having some form of cash on hand , analysts say it ’ s a good idea to diversify where your financial accounts are held . Keeping everything at one institution might simplify your life , but it has risks . In addition , different institutions are probably more appropriate for different needs anyway , they say .
“ You should always have a relationship with multiple banks ,” Perullo says . “ This is not just because of [ the recent failure of ] Silicon Valley Bank . Banks have failed since there have been banks . If you have the luxury of having six months ’ cash reasonably liquid in two banks , that ’ s great . But at the very least , you should have enough to weather a period of four to six weeks .” This , he says , would give the Federal Deposit Insurance Corp . ( FDIC ) sufficient time to sort out accounts in the event of a bank failure . do your homework to understand their privacy and security policies ,” Berlin says . “ Ask them what steps they take to protect your account and personal information , as well as any risks involved .”
Make sure your banks ( and brokerages ) have your correct , up-to-date address or addresses , phone numbers and email addresses , she says , so they can notify you in case of unintended activity . “ Some also allow you to designate a trusted contact , such as a spouse or other family member , whom they can notify in case of emergency or suspected fraud ,” she adds .
There ’ s no way to completely prevent fraud , of course , but some advisors recommend outside protection such as a
Besides having some form of cash on hand , analysts say it ’ s a good idea to diversify where your financial accounts are held .
As long as accounts are under $ 250,000 , they are insured by the FDIC . This agency , created by the Banking Act of 1933 ( signed into law by President Franklin Roosevelt ), was meant to stem a tide of panic-driven bank runs . It originally insured deposits of up to $ 2,500 , but since 2008 it ’ s guaranteed accounts up to $ 250,000 — and some in Washington want to raise that limit further .
Until the guarantee threshold is raised , if it ever is , it ’ s prudent to make sure no bank account is over $ 250,000 . If you need to save more than that , advisors say to spread it across different guaranteed accounts . “ Many banks and brokerage firms offer cash deposit programs that can [ deposit ] funds at different third-party FDIC insured banks to take advantage of the $ 250,000 limit at each institution ,” Marini says .
Depending on your cash requirements , excess amounts could also be invested in short-term securities . “ For deposits over and above the FDIC insurance limits , consider utilizing shortterm U . S . Treasurys or CDs to obtain an attractive yield and limit your uninsured deposit risk ,” Van Leeuwen says .
Which banks you choose could also make a big difference . “ If your primary bank is a small regional bank , consider opening a savings account at a national bank ,” Berlin at Kayne Anderson Rudnick says . “ If your savings is currently with a large bank , open a savings account at your local credit union .”
Credit union accounts aren ’ t FDICinsured , but they are backed by the National Credit Union Share Insurance Fund , which has the same $ 250,000 guarantee threshold .
Not all financial institutions are equally secure , she explains . “ Before opening an account at any financial institution , credit monitoring service that will notify you if your personal information is compromised . “ This can give you a leg up on bad actors and keep you informed on the security of your accounts ,” Van Leeuwen says .
While all of these ideas may help , no one can safeguard against every vulnerability . Whatever fate may throw at you , planners often recommend keeping an up-to-date list of all financial assets and accounts in a home safe or safe deposit box . “ In the unfortunate event of sudden illness or death , this will help your loved ones manage your affairs or settle your estate ,” Berlin says .
Advisors should also make sure that every client ’ s portfolio and insurance policies are well positioned for a variety of possible problems . “ Create a diversified portfolio that can withstand a disaster locally or abroad ,” Coastal Bridge ’ s Marini says . “ Conduct a comprehensive review of your insurance policies to ensure there ’ s adequate coverage in the event of a disaster .”
MAY 2023 | FINANCIAL ADVISOR MAGAZINE | 39