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?
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.