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Safety is another important benefit of cash. Despite bank and savings and loan failures, no depositor with insured cash instruments of $100,000 or less has lost a penny of principal or interest due. Ever since the Federal Deposit Insurance Corporation (FDIC) was set up in 1933, bank depositors have been able to sleep safely knowing that whatever happens to their banks, their money is safe as long as they keep the amount on deposit under the legal maximum. This could not be said before the FDIC was established. In fact, many bank depositors were wiped out when their banks failed after the stock market crash of October 1929. As expensive as it has been over the years for the federal government to keep its promise to protect bank depositors, and it has cost hundreds of billions of dollars, that assurance has provided stability for the banking system, which has allowed the economy to prosper. In countries where there is no deposit insurance, people keep their money under the mattress, or they open a foreign bank account—usually in America or Switzerland.

It is important to understand exactly what federal deposit insurance covers and what it doesn’t. Under current law, each account you have registered at a bank or savings and loan is insured up to $100,000. For example, a married man may have an account in his name, a separate account in his wife’s name, and a joint account in both their names. Each of the accounts would be separately insured to $100,000, for a total, in this case of $300,000. You can extend your coverage by opening accounts at other banks. While the FDIC is the overall insurer of deposits, banks are covered by the Bank Insurance Fund (BIF), and savings and loans are covered by the Savings Association Insurance Fund (SAIF). Credit union accounts are insured up to the same limit by the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NCUA). This structure was created as part of the savings and loan bailout legislation in 1989.

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