The safest place to keep your money may be a bank—but even there, it’s not completely protected. While the idea of bank robbers breaking into a vault and stealing all the cash is a far-fetched notion, there’s another culprit who could be putting the funds in your account at risk: you.
That’s because everyone makes common mistakes that put their money at risk in obvious and somewhat unexpected ways. Noticing and understanding these behaviors and trends can help curb them so that mistakes aren’t made in the future or money isn’t put at risk so easily.
GOBankingRates asked banking experts what five things you do that put your money at risk and how you can avoid it in the future.
Read more: I’m a bank employee: 4 reasons why you should withdraw your savings immediately
Discover more: 7 reasons you need to talk to a financial advisor to increase your savings in 2024
Earning passive income doesn’t have to be difficult. You can start this week.
No budget
Monitoring your finances starts with looking at your expenses, comparing them to your income, and seeing what you can afford. In a word: budgeting. If you’re not doing this, you may be wasting money.
“Creating a budget is the most effective way to stay in control of your finances,” explains Ben McLaughlin, financial expert and president of Raisin. “It helps you track your spending, pay bills on time, save for your goals, prepare for unexpected costs, and plan for the future.”
“Taking time to organize your paperwork and review your finances will help you feel more confident and in control of your money,” McLaughin said. “Take a moment to review your budget and recent expenses, plan for upcoming events and consider possible changes for the future.”
For you: How to withdraw money from a bank account? 3 ways to find out
No saving money
Putting money aside whenever possible can help ensure you have money now and in the future when you might really need it for an emergency or a big life change.
“With the rising cost of living, saving can be challenging and your ability to do so depends on your income,” McLaughlin said.
“However, it is important to always set aside some money for unforeseen expenses that could otherwise lead to financial difficulties. Setting up an emergency fund, regardless of its size, can help you cope with unexpected changes and prevent you from accumulating debt,” he explained.
Stick with low-interest accounts
By holding on to this low-interest account, you are not necessarily putting your money at risk, but you are preventing it from growing into wealth.
“Remember that your money in a low-interest savings account will lose value due to inflation,” McLaughlin said. “Inflation is the gradual increase in the cost of goods and services over time.”
McLaughlin gives the example: “If the inflation rate is 2%, an item that costs $1 today will cost $1.02 in a year. If your savings do not grow at the same rate, your money will lose value annually. Many interest-bearing savings accounts more than offset the rate of inflation, but if you leave your money in an account that earns very little or nothing, your purchasing power is guaranteed to be lower in the future.”
Exceeding the FDIC limit
If your money is in a bank account, you can rest easy knowing that it is insured by the Federal Deposit Insurance Corporation (FDIC), a government entity that provides deposit insurance for depositors of American commercial banks and savings associations. But even FDIC coverage only extends to a certain amount of your funds.
“If you save a lot of money, it’s important to spread your savings across multiple banks,” McLaughlin said. “Most people know that FDIC insurance covers deposits up to $250,000 in most cases, but they often need to be aware that this limit is per depositor, not per account.”
“If you have multiple savings accounts, CDs, money market accounts or other deposit accounts at a bank, any total balances over $250,000 are not protected if that bank goes bankrupt,” he explained.
Contributions to your 401(k) are too high
McLaughlin says saving as much money as possible for retirement now isn’t always better, but you can also put too much money into your 401(k) plan.
“While it is important to prioritise retirement savings, it is important to remember that this money will not be accessible for a long time, possibly decades, without significant losses, except in cases of extreme financial hardship,” he said.
“If you invest too much in retirement now, your personal savings will suffer and if you run into financial difficulties, they could quickly be depleted,” explains McLaughlin, pointing out that most experts recommend setting aside 10 to 20 percent of your income for retirement.
“The good news is the more money you make, the more you can put away for retirement,” McLaughlin said. “Incorporating savings into your budget is the foundation for long-term financial success. Sticking to it requires real discipline. Make sure you don’t undermine your hard work with activities that could put your savings at risk.”
More from GOBankingRates
This article originally appeared on GOBankingRates.com: I’m a Banking Expert: 5 Things You’re Doing That Put Your Money at Risk
