How To Protect You And Your Family From A Financial Disaster If There Is "A Run On The Bank."

 ..."Run on banks" and bank failures in the US are the center of attention worldwide. When I was a student at Tulane over 50 years ago, I took a course called "Money and Banking." It taught us how the banking system works in the US. (It works the same in most other countries in the world.) The instructor was a very capable young German man named Hans Flickenshield. He went on to better things including several posts at The World Bank.

     I recommend this course for all of you. It will change your life. If you are out of school, you can take it online. If you are in college or know someone who is in college, please urge them to take this course.

    If I repeated to you all that I learned, it would take several pages to do it. Instead let me give you an overview of what the course taught me. In the US, on any given day banks generally hold 1/7 or 14.28% of the cash needed to pay all depositors if they did "a run on the bank." The whole banking system is kept afloat by the public's confidence in the banking system. When that confidence collapses, there are huge problems. Social media has compounded this problem as it rapidly creates panic and a stampede of depositors trying to get their money out of the bank.

    How do you protect yourselves from a huge financial loss if there is "a run on a bank?" The answer is Diversify! Diversify! Diversify!

     Let me show you what Elena and I do. We begin our diversification with keeping our day-to-day operating money in a credit union account. These financial institutions rarely fail. I keep a separate account at a bank that is part of American Express for my pension check. Our retirement savings are spread out between two financial institutions. You would recognize the names if I wrote them here. Both institutions did not require a government bailout during the 2008-2010 financial crisis. Likewise, both financial institutions survived all the financial stresses of the Covid pandemic. We also keep an investment account equal to 4-5 months’ salary at a financial institution on the island of Mauritius. I would nickname this island "The Switzerland of Africa." It is prosperous, politically stable with zero toleration for corruption. The account is 100% legal and complies with all US tax disclosure requirements. Finally, we keep a small amount of cash and gold where we can get it immediately.