— with financial expert Adrian Raftery
We’ve all seen the stories of overseas banks collapsing and people rushing to the bank to take out their money in case they lose it. Should you do the same? Adrian says you needn’t worry.
“In the unlikely event of …” We hear this phrase all the time when the flight attendant goes through the plane safety procedures, but what about the “unlikely event” of your bank collapsing due to market turbulence?
The financial world has been turned upside down in recent months, with lots of institutions around the globe experiencing severe financial pressure to remain afloat.
Share prices have plummeted, houses have dropped in value and our super funds have felt the brunt as each day we hear of another story in the financial crisis.
But what about your money in the bank? Is it at risk? Should we all go to the bank tomorrow, empty our accounts and stick our funds under the mattress?
My simple answer is that if your money is with one of the big banks then it is pretty safe.
Personally, I feel very comfortable with my money being on deposit within a major Australian bank at the moment.
There are only 18 banks in the world that are AAA rated by international finance analysts Standard & Poor’s, and the good news is that four of them are here in Australia. They are CBA, Westpac, ANZ and NAB.
The Australian banking system is sound, with the major banks exhibiting strong balance sheets, unlike their foreign counterparts.
In simple terms, while our big banks are exposed to risk, they have enough assets behind them to take some hits along the way.
These thoughts have been echoed recently by the Reserve Bank Governor Glenn Stevens as well as Prime Minister Kevin Rudd.
However, if you are still worried about a bank collapsing, then I recommend dividing your monies across a few accounts with different banks to spread your risk. It is simple to do and lets you sleep easier at night.
You have worked hard for your money … you deserve to protect it.
In some good news, Prime Minister Kevin Rudd has announced that the Australian Government will guarantee all deposits of Australian banks, building societies, credit unions and Australian subsidiaries of foreign-owned banks. This guarantee will operate for a period of three years.
- Don’t look for the big interest rate. While higher interest rates are attractive, you must accept that they also coincide with higher risk.
- Check your pension entitlement.If you are retired and your investments have fallen in value, then you should check with Centrelink that you are receiving your full pension entitlement.
- Spread deposits across the banks. Although the risk of an Australian bank collapse is very low, it is prudent to spread your risk and not have all your retirement savings in one account.
- Keep deposits separate from mortgages. If a bank collapses then they invariably pay off any loans that you have with your deposits, so it is a good idea to have your savings with a different bank.
- Stick with the “majors”. CBA, Westpac, ANZ and NAB are considered the four biggest banks in Australia and hence the most secure in this current environment.
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