Your Money: Why safety matters for your cash

NEW YORK (Reuters) – Would you sacrifice the safety of your savings for $60?

FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez//File Photo

Last week investing startup Robinhood announced a market-leading checking and savings account paying 3 percent interest, a jump ahead of the current top rate of around 2.4 percent from the most aggressive high-yield savings accounts.

Social media went into a tizzy about the fine print. After regulators expressed caution, Robinhood pulled its offer. Click here to see full story here

The catch was that, as Robinhood touted on its website, deposits up to $250,000 in cash were to be insured by the Securities Investor Protection Corporation, which is not the same as bank deposits insured by the Federal Deposit Insurance Corporation.

It sounds like semantics, but it is actually a big deal.

An account insured by SIPC is an investment account, which comes with risk. The insurance only kicks in if the brokerage company goes out of business or is otherwise disabled.

It covers the return of what the investment is worth at that moment. If you invested $1000, and at the time the company went out of business is was worth only $950, you get only $950.

By contrast, cash in a bank with FDIC insurance is protected, along with the promised interest. If the bank goes under, you get your money back, dollar for dollar, up to $250,000 per account type.

Banks still do go under, just to refresh your memory. While there have been no

Keep reading this article on Reuters Personal Finance.