By: Revanche

What if you’re not small fry like I am?

September 18, 2008

An exercise in thinking like you’re rich.

I had a financial conversation with a colleague recently. ’twas random, we don’t usually talk money. He was on his way to open a new account over at Wells Fargo so that he could move his money out of WAMU, and I dismissively joked that as long as he had less than $100k in there, he’d be fine. Stressed, he said that he DID have more than that in there.

Yipes! I immediately, reflexively, scolded him, and then asked, “why Wells?” After all, they’re the one bank I remember as consistently charging the most and highest fees of all the major banks. It turns out, he says, they’re one of the few banks doing relatively well.

We chatted for some time about banks, online and B&M, and I had a hard time believing that he knew nothing about online banks. He’s understandably nervous, since he apparently isn’t very financially involved, so he just wants protection for his money. I can understand wanting to protect yourself, but I cautioned him not to settle for the first thing that seems safe just because he’s desperate for safety. Also, that’s what causes bank runs!

I advised him to look at INGDirect, Emigrant Direct, HSBC Direct, and FBNO Direct to get an idea of what kinds of online banks and services are available to him.

He wanted to know how I know that ING is safe. Well, darlin’, no bank is ironclad safe, but I don’t see any evidence that ING was offering the kinds of creative, “exotic” mortgages that all the big (B&M) boys were. At least it appears they didn’t participate in the bad-debt-generating feeding frenzy, so we know that’s good. Their primary business seems to be savings vehicles like their Electric Orange and savings accounts, CDs, and basic mortgages.

After we hung up, I realized: what am I doing giving somewhat superficial financial advice to someone has actual money to worry about? My net worth is less than his small change in the bank! Good grief.

I know he started picking my brains, but I felt a tad irresponsible for not assessing the situation more properly, asking more questions, and working with some actual data before making suggestions. Who’s to say I’m ready to play with big boys’ money?

All of that got me thinking: What DO you do when you have that kind of money (in the six figures)? What should you do if you had upwards of $100k in cash at the bank? I wouldn’t imagine that it would all be cash sitting in a savings account, right? My immediate reaction would be that some of it should be locked up in some high-interest bearing CDs, and a certain amount would have to stay in liquid cash savings accounts, but what about the rest of it?

The main goals would be 1) maximizing interest earnings while 2) keeping the money as safe as possible. Both conditions would have to be fulfilled when picking banks. Part of keeping that money safe is diversifying banks so that if one fails, I still have access to money at another one that is (I hope!) still functioning. Another part of that is making sure that all assets are insured by the FDIC: this means keeping the balances below the 100k limit. Theoretically, this isn’t playing-with-stocks-money, this is all savings.

If you had $150,000 in cash, how would you divvy it up and where would it go?


I’d keep $30K in savings accounts, at ING, for emergencies. Next, ING has an 18-month CD at 4.5% APY so I’d take them up on that for $50k, leaving myself a $20k FDIC cushion. After that? I’m not sure. Another $50 would probably be stashed at ED, at 3% APY. That leaves me with $20k. Without doing more research, I’d be tempted to leave the remaining $20k at Emigrant, but I still don’t have a regular B&M in this plan. So I could leave most of that $20k at ED, and a few thousand in a checking account like my Citibank account for paying bills.

I would also consider the Charles Schwab Bank which seems to have solid financial footing right now, and very little credit losses.

If I wasn’t certain about the amounts I already had in the banks, if I wasn’t just-now divvying up and depositing my money which is a more likely scenario than suddenly finding a sack of hundreds of thousands of dollars, I would use EDIE the Electronic Deposit Insurance Estimator to determine how much I had in FDIC covered banks, and make my moves accordingly.

Whew! There’s a whole lot of work involved in managing wealth. I guess it might be true what they say: the more money you have, the more time you have to spend thinking about it. Or at least, you definitely have to have a plan if you want to protect that hard-earned money.

What if you had $150k? $200k? $250k?

3 Responses to “What if you’re not small fry like I am?”

  1. mOOm says:

    Customers in Thailand are worried about ING:

    http://www.bangkokpost.com/190908_Business/19Sep2008_biz34.php

    I have a listed private equity fund maned by ING but don’t know much about the company at all:

    http://www.ing.com/group/index.jsp

    I suddenly started getting worried about my Mom’s account with Cheltenham and Gloucester Building Society in Britain. She has like £150k in the account… Especially with HBOS being taken over by Lloyds. Looking at the Northern Rock case though it doesn’t look like the government would let them fail.

    Doing some research – looks like Cheltenham and Gloucester is owned by Lloyds which is my Mom’s other UK bank. I used to have an account with them too. Once upon a time I had an account with TSB which also was merged with Lloyds. I think my parents mortgage was with Halifax Building Society which became HBOS now to also be taken over by Lloyds. So all our UK financial institutions have all been rolled up into Lloyds Bank!

  2. Sense says:

    Interesting post! I do think you are somewhat qualified to give suggestions…after all, if you can’t handle small sums of money, you definitely won’t be able to handle the larger ones.

    and I didn’t realize this but you CAN have more than $100K in one bank and still be insured for it all:
    http://millionairemommynextdoor.blogspot.com/2008/09/banks-are-failing-are-your-financial.html

    But that isn’t much help when this is going on:

    http://www.inrich.com/cva/ric/news/business.apx.-content-articles-RTD-2008-09-17-0132.html

    Exactly how much money can the government afford to give away??

    Hello, higher taxes…

  3. Revanche says:

    moom: Eesh, I should really be more up on my international news. I really want to believe that ING is much more stable, from their statements, but really wouldn’t feel comfortable until I see actual numbers.

    I had no idea that UK banks were so intertwined as to be owned by Lloyds! That’s a little bit scary.

    sense: True, I do have some grasp of dealing with small monies, it’s just that I’d never thought about the scope involved in managing a large amount, as a routine matter of fact.

    I did know that you were still covered if part of your money was in a joint account, but I had no idea that IRA and other investments were insured up to $250k. ’tis all a moot point if the FDIC runs out of money, though.

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