Nov 8, 2024
Anyone who lived through the Great Recession remembers the tremendous economic turmoil that took place.
Banks had made mortgage loans to unqualified borrowers, bundling those loans into mortgage-backed securities that were sold to investors. The entire house of cards collapsed as home prices began to fall and interest rates began to rise. Several major banks failed and the stock market plummeted.
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While the economy eventually recovered, many people became wary of financial institutions — with some people worried enough to withdraw their funds from banks and brokerage firms entirely.
If you're one of those people and have been hoarding cash since the Great Recession, you've sadly missed out on the chance to benefit from years of economic growth. While the average closing price for the Dow Jones Industrial Average was around $8,886 in 2009, the average in 2023 was $34,122, and has continued to rise in 2024.
For those who want to get in on the gains, it may be time to make a change. However, you'll need to understand the rules for doing so.
How to deposit a large sum of money
If you've amassed a large sum of money at home instead of putting cash in the bank, you may be wondering if it's even possible to deposit it once you've had a change of heart.
The answer is yes, but there are some caveats.
Specifically, when you deposit over $10,000, your bank is required by the Bank Secrecy Act to report it to the Financial Crimes Enforcement Network. Your bank may ask some personal questions, including why you're depositing such a large sum, so you must be prepared to answer them.
To be clear, if you've done nothing wrong, earned the money legitimately and paid taxes on it, this reporting requirement shouldn't worry you. You just need to know about it so you aren't caught off-guard by the bank's queries.
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What you don't want to do, though, is break up your big deposit into a series of smaller ones to evade reporting rules. This is called “structuring” and it's illegal even if you earned the money legitimately.
It’s also a good idea to call the bank in advance of making a large deposit. Showing up with $650,000 in cash could cause problems if the financial institution isn't prepared to handle that much all at once. Your bank can work with you to find a safe way to deposit the money.
As for how much of your cash is protected, you should be aware that the Federal Deposit Insurance Corporation (FDIC) only insures up to $250,000 per person, per FDIC-insured bank, per account ownership category. So, simply depositing $650,000 into a single bank account might not be the best move. You may want to spread out your money across different accounts and possibly at more than one institution so you don't risk losing funds if another bank collapse happens sometime in the future. Understanding deposit insurance can be key.
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Making moves
While banks gave consumers lots of reasons to distrust them in the leadup to the Great Recession, the reality is that over-reacting and opting out of the financial system isn't necessarily the right move.
In fact, if you had money in index funds at the time, you may have been able to recoup any losses and earn much more. For example, if you'd had $100,000 in an S&P 500 index fund in 2009, that money would be worth around $850,000 in 2024, if you reinvested all your dividends.
Recoveries happen, as well as recessions. Many experts believe the single-best way to grow your wealth is to invest steadily over the long-term. Investing legend Warren Buffett even recommends average investors put their money in an S&P 500 index fund, since the index has a multi-decade track record of success. By not participating, you may be limiting your earning potential.
Correction, Nov. 8, 2024: This story has be updated to accurately reflect FDIC insurance limits.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
