Everyone should know how to effectively keep their savings secure at all times. Those whose money is in a traditional UK bank will have protection under the Financial Services Compensation Scheme. A total of £75,000 is guaranteed for protection for each individual person per bank or credit union. While this appears to be very straightforward, there are still some things that you will need to know.
Regulations to Protect Your Money
In the UK there are regulations to protect your money, as long as it is in an established financial institution. Money that is put into joint accounts get double the protection or £150,000. The FSCS covers money in banks and credit unions, but only up to a certain amount. Those who think that they are reducing their risk by spreading their money out over numerous savings accounts might be mistaken. You may also have the standard £75,000 covered, so check with your bank before taking this action.
How it Works
The FSCS is a fun that is regulated for the government and exists for the sole purpose of providing people who have their money in banks, with payday lenders such as Emu.co.uk and credit unions with a safety net. This means that if your bank goes under for whatever reason, most if not all of your money will be safe. You might not have access to cash for a while, but you will be compensated eventually. Even children’s accounts are protected in this way, and it should give you some peace of mind.
Protecting Your Savings in Foreign Banks
You will find that many banks in the UK that are owned by overseas companies get the same protection that all others do (maximum of £75,000). There are some European banks that do not offer this protection. This is due to the fact that certain banks are protected by the scheme in their home country. If the bank goes under, you will need to go through the overseas country’s compensation scheme to get your money back.
What are the Chances of My Bank Going Under?
A lot has changed since the financial crisis, and mostly for the better. There is always the chance of something happening to your bank, but the FSCS will ensure that you get your money back. As unlikely as this situation may be at the present time, it is still important to be prepared. You will need to make sure that your heard-earned cash is in an official UK financial institution.
Spreading Your Money Around
It is a good idea to limit your savings to £73,000 per financial institution. Those who have less than £75,000 won’t have to worry about spreading their money around, as it will be safe. The problem comes when your savings exceed the maximum FSCS coverage amount.
Those who put more than £75,000 in a single financial institution are putting themselves at risk. If your bank goes under, you could lose the difference. By spreading your savings out across multiple institutions, you won’t have to worry about losing any of it if something happens.
If you happen to have a joint bank account, you will be covered up to £150,000. If you have more than this amount in savings with your spouse, you should spread it around. Those who have less than that can keep it all in one place.
Sometimes going over the limit can be the practical way to go, but you will need to spend some time thinking about it first. You might want to consult with a professional so you know you are making the right choice.
What if I don’t want to Spread my Savings?
There is another option available to those who don’t want to spread their money across numerous pots. You can use a government-backed NS&I, which will guarantee all of the money that you put into it. The only situation in which your money wouldn’t be protected is if there is a government-wide collapse, but this is highly unlikely. This is one of the best solutions for those who have a very large amount of money that they want to store in one place.
Check Your Accounts Every Day
It is important that you check all of your accounts on a daily basis to ensure that everything is okay. Pretty much every single financial institution will allow you to do this online, which is very convenient. It only takes a few seconds to do this, and it is well worth the time. If you notice any sort of problem or anomaly with your account, you need to get it resolved right away. The longer you neglect the problem, the bigger it is going to get. Also, make sure that you only put your money into reputable financial institutions that you can rely on for the long term.