Financial Redundancy

In the high-tech world the term redundant is actually a good thing. Most folks think of redundant in terms of jobs, and being declared redundant (i.e. being laid off, or the like), however in the high-tech world redundant is actually a vital part of reliability. If there are redundant systems in place, or redundant connections then there are backups in place to take over if one of the systems fails, and that is what I mean by Financial Redundancy.

Last week there was a very good tweet that inspired me to think about this concept.

The point being made is that you need to have a separate bank account in a different bank or savings concept (trust company or the like) just in case your main bank account or bank gets compromised in some way. What do I mean by compromised?

  • Your account has been hacked and thus locked out so you have no access to it, until the issues with the security intrusion is remedied.
  • Your bank “goes down”. This can be a myriad of possible issues including: Interac failure, Computer system crash, bank is hacked (as mentioned in the tweet), etc.,
  • Your bank fails? Yes, this is ridiculously drastic, but it has happened, and I am sad to say, it will happen again (ask the folks who had money in Savings and Loans in the states)

Really the question is what do you do if you don’t have a redundant money supply to fall back on? You could use your credit cards, and you already have a redundant system there don’t you (pretty much everyone has more than 1 credit card, a Visa, a Mastercard, an Amex, maybe even a Diners Club), so why don’t you have some redundant savings in place too?


This Seems Redundant

An idea is maybe putting your Emergency Fund (which we all should have in some fashion) at a different bank? That way it really can help in an emergency.


{ 6 comments… add one }
  • Tawcan December 9, 2015, 2:16 PM

    Hmmm interesting concept. I don’t see banking shutting down their service completely because they got hacked. But I guess never say never.

    • bigcajunman December 9, 2015, 2:44 PM

      Agreed that the premise does seem to be a bit over the top, but once can never tell. Certainly I have seen specific banks Interac interfaces going down, so it couldn’t hurt to have it for that. An interesting idea.

  • Robert M December 9, 2015, 10:38 AM

    I am not sure if I accept the premise that you need to account for the failure of an institution. Banks in Canada are well funded and regulated, and I can’t envisage a scenario where a single institution would be vulnerable to an attack.

    Should an external attack occur, I expect to see the federal government and other banks stepping up to minimize the impact.

    Take a look at what happened in Greece. The banks came close to running out of money, but the government shored them up.

    In Canada, the closest that I ever came to being worried about access to money was during the Ice Storm. I weathered that storm by taking out the maximum in cash and using plastic for the 3 days of concern.

    I think that two separate accounts will be difficult to manage and may result in a lost bank account. An issue that you may have written about in the past.


    • bigcajunman December 9, 2015, 10:53 AM

      We would be living in interesting times if a bank failed or was shut down due to a cyber-attack, that is certain.

  • Chuck December 9, 2015, 9:46 AM

    In the IT world, we call the concept ‘High Availability’. If part of the backend system fails for any reason, you don’t lose functionality. It’s a great concept to employ in your personal finance systems as well.

    • bigcajunman December 9, 2015, 10:20 AM

      Yeh, I suppose :-), I like redundancy more (communications terms).


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