Understanding Banking Concepts and Risks

The video discusses the safety of storing money in banks versus at home, highlighting the role of fractional reserve banking and the FDIC in ensuring deposit safety. It explains the insurance mechanisms for banks, credit unions, and investment accounts, emphasizing the importance of understanding financial risks and the impact of inflation. The video encourages viewers to consider what they want to protect their money from and suggests strategies for mitigating financial risks.

Why might someone choose to keep their money in a mattress instead of a bank?

• To ensure quick access to cash

• Due to fear of bank failures

• To earn interest on savings

• To avoid bank fees

What financial innovation allows banks to lend out most of their deposits?

• Full Reserve Banking

• Fractional Reserve Banking

• Central Banking

• Digital Banking

What was a common consequence of fractional reserve banking in the past?

• Higher savings rates

• Bank runs and failures

• Increased interest rates

• More secure deposits

What does the FDIC do when a bank's reserves drop to around 6%?

• Increase interest rates

• Force the bank to take corrective action

• Provide additional funds

• Close the bank immediately

How does the FDIC fund its insurance for depositors?

• By charging banks based on risk

• Through donations

• Through taxpayer money

• By selling government bonds

What organization insures deposits at credit unions?

• FDIC

• NCUSIF

• SIPC

• Federal Reserve

Which type of financial instrument is typically uninsured?

• Treasury bills

• Savings accounts

• Certificates of deposit

• Crypto investments

What is a major risk of keeping cash in a savings account or a mattress?

• Theft

• Inflation

• High fees

• Low liquidity

What should you consider if you're worried about your company's stocks losing value?

• Buying more company stocks

• Keeping cash in a savings account

• Moving to a broadly invested mutual fund

• Investing in real estate

What is a recommended strategy if you're concerned about your bank's stability?

• Investing in gold

• Keeping cash at home

• Ensuring accounts are with insured institutions

• Switching to a different bank