Why do people always say banks are safer than brokers? I think that's outdated

I keep hearing people in my family say that putting money in a bank is the safe bet and brokers are for gambling. But last year my savings account paid me 0.5% interest while my brokerage money market was getting 4.8%. That's a BIG difference over 12 months on $10,000. Am I missing something or is the old rule just not true anymore?

2 comments

2 Comments

angelafisher5d ago

My aunt still keeps cash in a cookie jar because she doesn't "trust the computers," so I feel you on this. The bank vs. broker thing reminds me of how people my parents age still print out MapQuest directions instead of using GPS. Sure, banks are insured by the FDIC up to $250k, so your money is technically safer from the bank going under. But inflation eats that 0.5% interest alive while your money market is actually keeping up with the real world. It's like people got stuck on a rule from the 80s and never bothered to check if it still made sense.

williamschmidt5d ago

Best thing I ever did was move most of my savings out of a standard savings account into a high yield money market. You still get FDIC coverage with many of them, but you actually earn something that looks like real interest.