Pandemic personal finance update #2: Bank deposits are something you do NOT need to worry about

Your personal finance to-do list for this week:

• Stop worrying about your bank deposits
• Consider an online option for drafting a will
• Find cheaper home and car insurance

The Pandemic Personal Finance Update is a weekly feature of practical, actionable ideas and tips to help people manage their finances through the difficult times ahead. If there’s anything you’d like to see covered, contact me at rcarrick@globeandmail.com. Let’s get started.

Cross the banking system off your list of things to worry about

Over the past few weeks, a significant number of people have expressed concern about the safety of their deposits and guaranteed investment certificates at the big banks.

“We track sentiment and we are picking that up in our numbers as well,” Peter Routledge, president and CEO of Canada Deposit Insurance Corp., said.

Mr. Routledge’s response to these fears: “In this environment, there is no safer place for your money than a CDIC-protected bank account.”

He offers two reasons why your CDIC-protected money is safe, the first being that lessons learned from the 2008-09 financial crises were used to make banks and the banking system financially stronger and more resilient. The second is CDIC’s track record: “No one has ever lost a dollar that was insured by CDIC,” Mr. Routledge said.

CDIC counts big and alternative banks as members and it protects seven different categories of eligible deposits for up to $100,000 each, including principal and interest. Those categories are deposits held in one name, a joint account, a registered retirement savings plan, a registered retirement income fund, a tax-free savings account, an in-trust account and an account to pay property taxes on a mortgaged property.

A mantra to adopt as you safeguard your finances in the months ahead: trust, but verify. Applied to CDIC, you’d want to know what resources are available to make up losses if a bank fails.

Mr. Routledge said CDIC has a $5.7-billion fund available to cover losses. It’s safely held in a five-year ladder of government bonds, which means equal investments in bond with terms of one through five years. This is safe investing 101 stuff.

More money is available through what can best be described as a $25-billion line of credit with the federal government. Additional funds would be available, but Parliament would have to evaluate the request.

What happens if bank does fail? “You don’t have to do anything,” Mr. Routledge said. “We go find you if something awful happens. We give you full access to your deposits, up to the limit.”

For another take on the safety of the banking system, let’s check in with one of the country’s top authorities. David Dodge has served as Bank of Canada governor, a senior bureaucrat in the federal finance and health departments and a director of major corporations. He’s now a senior adviser at the law firm Bennett Jones.

Mr. Dodge could not be clearer about the safety of banks. “The last thing that any central bank or any government would permit is for the financial system to collapse and for the banks to fail,” he said in an interview last week.

Draft a will, look for cheaper insurance

We reported in mid-March how law firms across the country were receiving a surge in inquiries from people who wanted to set up wills and powers of attorney. The same applies to Willful, a website that guides you through the process of creating a will.

“The virus has hammered home the fact that the unexpected can happen any time,” Erin Bury, Willful’s CEO, said. “Also, a lot of people are sitting at home with extra time on their hands."

Willful offers three will packages – basic for $99, premium for $149 and for couples for $249. The challenge right now is finding two people who don’t benefit from your will to witness the document. Willful offers a bunch of tips for getting a will witnessed during the pandemic, including sanitizing the surface on which the will is to be signed, washing your hands before and after signing and asking signers to supply their own pens.

If you don’t have a printer, you can e-mail the document to Willful and it will print and ship it to you at no cost.

Another way to use extra time as a result of social distancing is to dive into the tedious process of comparing online quotes for car and home insurance to save money on premiums. I wish I could point you to a killer app that would let you compare all insurers with a fixed set of policy features, but I have yet to find it.

Start with a Google search for “compare home and car insurance rates” and dig in. You could save hundreds of dollars a year.

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