Mattress Money?

These days a lot of people are frightened and with good reason; banks are collapsing, brokerages are going out of business, and even that old standby, the mattress has, for some, been replaced by an air mattress.

But even if you watch all the TV reports, financial advice programs, and all-financial networks, you probably have little idea how to really protect your money in a practical way.

While the financial news services do a fine job of telling you what stocks went down yesterday, they only guess about the reasons – you can easily see this for yourself because they often give the same reasons for the market going up or down, or explain a move two different ways on different days.

What they don’t tell you are the simple rules you should have learned in high school (if schools actually taught anything about such an important topic).

For example, some people are frightened about the safety of their bank accounts or money market accounts, both of which are insured.

The FDIC is the most well-known insurance plan, and I’ve actually had people tell me I was crazy to have my accounts in places that weren’t covered by the FDIC.

But consider this – the FDIC is actually an insurance program sponsored by the federal government but supported by payments from member banks and, as anyone who has heard of AIG now realizes, even insurance is only as good as the amount of money held in reserve.

The sad fact is that if one or more really major banks failed the FDIC would be swamped by the requests for remuneration by depositors and wouldn’t actually have the funds to pay off more than a few.

While the government would probably back those accounts, there is no actual guarantee that it would do so.

So, is a mattress or home safe a better place for your money? How about government bonds that pay almost no interest?

Actually, there is some place safer than FDIC-insured banks and that pays better interest than short-term government notes – federal credit unions.

Credit unions in general, along with most small town banks, were much more careful about lending because they held mortgages they wrote. That meant they would only lend if they were pretty sure they would get their money back, unlike mortgage companies that didn’t care because they quickly sold off mortgages to unsuspecting investors.

So, credit unions are fundamentally safer because they stuck with the old banking practices instead of getting involved in exotic financial instruments that, it turns out, even Wall Street executives of companies investing in them didn’t really understand.

Credit unions also don’t spend a small fortune on executive salaries or big marble buildings in which “real” bankers are so fond of working.

But hold on, how about that FDIC guarantee that you will get your money back?

Well, credit unions have something better. Credit union insurance, known as NCUA, is very similar to the FDIC insurance that banks use, but with one gigantic difference.

While the government may, and probably will, print money as necessary to save big depositors if a giant FDIC-insured bank fails, they might not.

Federal credit unions have something better – the U.S. Treasury backs federal credit unions using these magic words: “the full faith and credit” of the U.S.

Here is the exact wording from one federal credit union: “savings are federally insured by the National Credit Union Share Insurance Fund (NCUSIF) to at least $250,000 and backed by the full faith and credit of the United States Government.”

See details about the NCUA at

What “full faith and credit” means is that insured funds in an FCU (Federal Credit Union) are backed the same way a U.S. Treasury bond or note, or dollar bill, is backed.

I’m not saying that is a perfect guarantee these days, but it is a lot better than FDIC and it is a lot easier to write checks on an FCU account than it is on a Treasury bond.

Even better, virtually anyone can join a federal credit union and they all pay better interest than the Treasury.

I know one FCU that is offering a 4+percent 22- month CD and you can even take money out or put more in!

So, which is safer? An FDIC-insured bank account? A well-stuffed mattress? Or a credit union account?

Just don’t make the mistake of thinking that keeping your money in cash any place isn’t investing. You are still investing in the value of the U.S. dollar, which hasn’t been doing too well over the past few decades.

But, if you want to keep cash, please consider the additional safety of keeping it in an FCU.

I’m not going to recommend a specific credit union simply because you probably can’t join the two FCUs where I have accounts. All credit unions have membership requirements, but every legal resident of the U.S. can join SOME FCU and, in any case, you will want to shop around among the ones you qualify for to find which works best for you.

Search for a nearby credit union at


You can also try the phone book for a local credit union, and if you have a relative working for some government agency the chances are he or she belongs to a credit union and many FCUs extend membership to close relatives.

If you belong to any professional organization, the chances are if it doesn’t have a credit union it has an affiliate agreement with one. offers credit union rates as well as those for banks. This week some one-year CDs are running above 3 percent.

The biggest difference between a credit union and a bank stems from the basic fact that if you have an account at a credit union then you are one of the owners.

In my next financial advice report I will explain some things about margin accounts you probably don’t know.

I might also get into the best performing asset class of the past decade – hint: you won’t learn what it is from the financial networks. They all report on it daily but never seem to mention long-term performance – it has been up every year for nearly a decade.