If you've been preparing your personal budget, creating retirement investments and saving money, you should have a sizable amount in the bank (or at least some money to go off of.) With everything that's been going on in the news lately, you might also be concerned about what would happen if your bank defaults much in the way Bear Stearns, Countryside, and lots of smaller financial institutions have.
Luckily, the American banking system is insured, to a certain extent. There are several groups that cover bank runs like the kind that happened during the Great Depression, depending on what kind of bank you are using. Most institutions, including state and nationally chartered (founded) commercial banks, are covered by the FDIC, the Federal Deposit Insurance Corporation. This organization guarantees all of your deposits up to $100,000. This includes deposits (including checking and savings,) money market accounts, and time deposits like CDs. The FDIC will cover one account per institution, so if you want to really minimize risk, having three different bank accounts is the best way to go, although not the most efficient.
The FDIC does not cover U.S. Treasury bills, bonds, or notes, which are backed by the United States government. It also does not cover stocks, bonds, mutual funds, life insurance policies, annuities, and municipal securities (or "muni" bonds). This is true regardless of whether they were purchased from a bank or not. All online bank accounts are typically FDIC-insured. Somewhere on the site should be a symbol indicating that the bank is an FDIC-insured institution. You may also want to check directly with representatives of of your bank as to what exactly is insured.
If you belong to a thrift (a savings and loan or savings association), your money is covered by the Office of Thrift Supervision, and if you belong to a credit union, your money is covered by the NCUA (National Credit Union Administration.), which may have different rules, depending on which institution you belong to. They cover slightly different amounts than the FDIC, but are also backed by the FDIC in case of their collapse.
What's the best way to minimize risk in today's market? There are several ways. One is to keep your money split in several banks through savings and checking accounts. As mentioned in previous articles, though, they get bad rates. Ask Metafilter, via Get Rich Slowly, has a great feed on minimizing risk. Some suggestions include US savings bonds, CDs of different maturity rates, also known as "laddering", and index funds.
The best way to hedge against risk and to earn interest rates at the same time is to open several online bank accounts with banks like ING, Emigrant Direct, and HSBC. Not only do they have the highest rates, they're also FDIC-insured just like regular brick and mortar banks.
