Wow.  We haven’t seen 4% APY savings account rates in quite some time – the Fed and their magical rate dropping act have made sure of that.  Earning 4% on your savings is a great opportunity to (help) keep the inflation problem at bay.  That being said, I’d think long and hard about transferring your life savings to WaMu.

Don’t forget about that whole impending bankruptcy thing

No one really knows for sure whether WaMu will bite the dust or not.  It’s up in the air, and could really go either way.  If they do happen to fail, there’s a potentially large problem.  Sure, the FDIC will jump in to save the day.  Only problem is, the FDIC has far less on hand than WaMu has in deposits.  By the time WaMu pays all their debts, will there be enough to give you back your savings?  Who knows.

Think about the risk to reward ratio

I see putting my money in WaMu as a risk – a fairly significant one.  There’s always the chance the government will simply print more money to satisfy the FDIC’s purpose.  In that case everyone will get their money back.  ( The problem of inflation is for another post ).  But there’s a very real chance that the bank will fail, and you won’t ever see your money.  For that kind of risk, I want a hefty reward.  Four percent interest isn’t nearly enough to convince me.  Before I put my money in WaMu, I’d put my money in the stock market.  I have a similar risk of loss, but with a chance for greater reward.

If you want the rate, be smart

If the 4.00% APY is too tempting for you, I understand, and I won’t try to talk you out of it anymore.  But do yourself a favor.  Don’t put your entire savings into WaMu.  Make sure you have a sizeable chunk elsewhere – just in case the FDIC does have to step in.  While they’re figuring out how to get your money to you, you’ll still have an emergency fund that’s accessible.  Remember, these times are strange, and banks aren’t quite as safe as we’ve been used to.