• Tuesday, July 23, 2024
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Personal finance lessons from Silicon Valley Bank

Personal finance lessons from Silicon Valley Bank

The Silicon Valley Bank (SVB) is a California-based bank that recently collapsed because it couldn’t make money available to its customers after a rash of withdrawals, and this is a news that has created a lot of stir on the internet and especially in the start-up/venture capital sector. SVB failed on March 10, 2023, as a result of a run on bank deposits. Concerns were raised about SVB’s financial health when it had to sell its bonds at a big loss because it didn’t have enough cash, which led to the frenzy and then the news about its failure.

The Federal Deposit Insurance Corporation (FDIC) usually steps in to protect deposits up to a certain limit, which is currently $250,000 per depositor per insured bank in the US, and those who have monies lower than that will get their funds.

The Nigeria Deposit Insurance Corporation (NDIC), which is similar, was started in 1988 to protect depositors and make Nigeria’s banking sector safer and more stable. It is an independent agency of the federal government of Nigeria. They protect Nigerian bank depositors against possible losses in the event that a bank fails by giving them insurance. Up to a cap of N500,000 per depositor per bank, the insurance covers all deposit types, including savings, current, and term deposits.

Bank failures do not happen all the time, but it is a good time to talk about how to reduce risk and make sure your financial assets are safe. From a personal finance point of view, you could lose part or all of your money if a bank that holds your uninsured cash collapses, and there may be a few serious repercussions from this, including:

-Loss of savings and investment funds: If you have uninsured money in a bank that collapses, you could lose it, especially if it falls above the range of funds that can be insured. A loss of funds could be disastrous for your ability to make ends meet.

– The inability to pay bills or make required expenditures: such as those for housing, food, or medical costs.

-The unpleasant effect your financial decisions have on people who depend on you, businesses, and other people who are directly or indirectly affected by them.

Read also: Global Money Week: SEC restates need for savings, personal finance

There is a need to take a number of steps and use different strategies to protect your personal finances or wealth. Here are some pointers to help you safeguard your financial or material wealth:

Ask questions about your deposits, savings, and investments, especially those done through your bank. Check with your bank to see if your deposits are insured; if not, think about dividing your money among several institutions so that each deposit is covered to the fullest extent possible. This might be practically impossible if you have a lot of funds, but it is a precautionary measure to be aware of.

Create a budget and follow it. Maintaining a budget is one of the best strategies to safeguard your personal finances. You can manage your expenditures and prevent overspending with the use of a budget.

Create an emergency fund. An emergency fund helps protect your finances by giving you a safety net in case of unexpected expenses or a loss of income. Try to have at least three to six months’ worth of living expenses saved up.

Diversify your investments. Spreading your money across different asset classes and industries makes it less likely that you’ll lose all of your money in one place.

Scams and fraud are prevalent, and you should do all you can to avoid falling victim. Do your research on possible investments, avoid offers you didn’t ask for, and check the credentials of any financial counsellors or brokers you might work with.

For the online security side of things, employ two-factor authentication and strong passwords. By using strong passwords and turning on two-factor authentication, you can safeguard your online accounts.

Think about insurance: It can shield your personal finances from unforeseeable occurrences like accidents, diseases, and natural catastrophes.

The list isn’t complete, but if you adopt these tips, you are more likely to protect your financial future and personal assets.