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Protecting Your Deposits From Inflation And Bankrupt Banks

by Jim ONeil on October 27, 2011

in uk banks

People who have saved money their entire lives never dream of needing loans to pay their bills. However, some savers may find themselves in this situation due to no fault of their own. As countries going bankrupt are unable to print euros, the global banking system is seriously threatened. In addition, money printing like that being done by Britain has inflationary consequences.

Electronic bank runs could result in savers withdrawing trillions of dollars in deposits in mere hours. In just one day after a euro zone banking collapse, the U.S., UK, and Asian banking systems could fall. Savers who did not act quickly enough could find themselves searching for cheap loans to replace the money they lost.

The state of the financial system is worse than in 2008 when Lehman went bankrupt, bringing the U.S. financial system to its knees. In the event of a collapse, deposits over the £85,000 limit will be at risk in all banks other than the government-backed National Savings and Investments (NS&I). UK depositors should take steps now to reduce the risk of losing funds and protect loss of value due to inflation.

Maintaining at least two current bank accounts across banking groups is recommended. At least one account should be with a relatively safe bank like HSBC. After listing each account and deposit amount, then grouping these by banking sector, identify any banking group balance exceeding the £85,000 limit. Immediately move the excess funds to another banking group or transfer them to a spouse.

Savers should have a procedure in place to quickly transfer money from high to low risk banks. Small building societies and banks are higher risk than larger ones. A sample approach is to open an NS&I Direct Saver account right now and transfer cash into this should a sovereign debt crisis begin unfolding.

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