The recent meltdown of the IndyMac bank is another clear example of never, ever, keeping all your eggs in one basket. In this case, the eggs being your life savings. While a vast majority of their deposits were insured, one BILLION dollars worth were not.

But I thought all my savings were insured by the FDIC? Think again.

First off, there is the $100,000 limit per named account holder. The named account holder is the important part. I could, say, have two accounts at a bank under my name. The total I’m insured for is $100K regardless of the number of accounts. The only way around this is being married and having one account in one partner’s name, and another in the others, and even then we’re only covered for $100K.

Now, I know that many readers will say “$100K-that’s more than I’ll ever save”. Well, not with inflation, nor with the fact that you should have at least $1,000,000 put away for a care-free retirement (though, most people would have that in uninsured mutual funds or 401Ks).

I’m a firm believer of having my money spread around. Not so much as to make it difficult to manage, but well enough to reduce my risk of losing money (or being locked out of it). I learned this lesson very well with the whole Whittman-Hart debacle, where loads of people had their retirement funds locked down, meaning they couldn’t dump their worthless stock. I was lucky to have quit before then, and quickly (for once) moved my money elsewhere. Others were not so lucky.

In my opinion, you should never have only one 401K and you should never deal with only one bank. Having a handful of 401Ks can be a huge pain in the ass, and many “advisors” say roll-them-into-one. That’s a good idea, and makes them easier to manage, but puts ALL of your retirement in one basket. Are you sure you want to do that? I thought not.

Same thing goes for checking and savings accounts. You should always, always, always, have at least two checking accounts. If you are married, have a joint one, and each spouse should have their own at different banks. You are doing this for a couple of reasons. First, each will be insured up to $100k. Second, divorce happens, and you want a way to get money out of joint accounts quickly. (If you are considering parting from a former loved one I recommend [a] move the money quick and [b] cancel every credit card you have. And, no, I’m not getting divorced. Far from it.) Third, banks fail, and you should have your money spread around a bit.

Basically, the same rule that most advisors say about your retirement (“diversify”) holds true for how you handle your day-to-day cash. With tools like Quicken and on-line banking, managing several accounts is no trouble at all. It’s your money after all, and you should guard it as best you can.