How Safe is Your Client’s Cash?

CFP® Certificants in the News

CFP Board expects certificants to understand “safe haven investments” of cash.  A safe haven in this context is an account with a low default risk, as in bank deposits guaranteed by the Federal Deposit Insurance Corporation (FDIC).

 You may have heard that cash deposited into a federally chartered bank is guaranteed up to $250,000 by the FDIC, an agency of the U.S. Government.  While that is true, it’s vastly understates the guarantee available.  For example, assume your married clients Jack and Jill have a total of $2,000,000 in savings accounts in two Federally chartered banks. They plan to invest this $2,000,000 gradually into the market over the next 18 to 24 months.

  • They’re entitled to $250,000 in guarantees per ownership category per Federally chartered bank.
  • The chart below shows three ownership categories (there are 14) including accounts owned in Jack’s name, Jill’s name, and joint name.
  • Interestingly, the FDIC coverage is $250,000 per joint owner in jointly owned accounts.
  • They have FDIC coverage of $1,000,000 in ALPHA Bank plus $1,000,000 of FDIC coverage in ZED bank.
JACK’S NAME 250,000 250,000 500,000
JILL’S NAME 250,000 250,000 500,000
JOINT OWNERSHIP 500,000 500,000 1,000,000
TOTAL $1,000,000 $1,000,000 $2,000,000

Here’s an interesting question.  Could your clients use FDIC to protect themselves from equity market losses?  That answer is a resounding no!  Only traditional bank products such as checking, saving, money market, and CDs qualify for FDIC coverage.

Here’s the bottom line, leaving $2,000,000 in low-return traditional bank products for an extended period of time leaves Jack and Jill’s purchasing power open to inflation, but as a tool to keep cash safe from default risk during a short period, it may well have a place in Jack and Jill’s financial plan.


The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide legal, identity theft protection, investment, income tax, risk management, retirement, estate, or financial planning advice of any kind. An experienced and credentialed expert should be consulted before making decisions relating to the topics covered herein. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.