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Money safety in bank crisis

Gerri Willis tells you how to keep your money safe after Wall Street's meltdown.

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By Gerri Willis, CNN

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For more information on managing your largest investment, check out Gerri Willis' "Home Rich," now in bookstores.

NEW YORK (CNNMoney.com) -- Lehman Brothers filed for Chapter 11 bankruptcy protection and Bank of America is buying Merrill Lynch. With the changing banking landscape, here's what you need to know about the safety of your own bank.

1. Get the context

The real estate crash and credit crunch that consumers have been struggling with for almost a year finally hit home for investment banks and brokers this weekend.

And the implications are wide ranging. This could make the credit crunch wider and deeper. And it's not going to get any easier to get a loan given the uncertainty of the situation.

For Merrill (MER, Fortune 500) brokerage clients, the broker will continue to exist under Bank of America (BAC, Fortune 500) and will probably still be called Merrill. Bank of America will most likely try a seamless turnover.

Though rumors continue to swirl around the solvency of Washington Mutual (WM, Fortune 500), there's one thing to remember here: It's not a time to panic.

2. Know your limits

In response to Lehman Brothers (LEH, Fortune 500), the SEC put out a statement saying that it is taking actions to ensure that people who have accounts at Lehman Brothers will recover the assets in their accounts if Lehman becomes insolvent.

The SEC has strict rules about keeping the brokerage's money separate from your investments. So even if the firm goes under, your money should still be there.

And there's another layer of protection here - the Securities Investor Protection Corp, known as SIPC. If money is missing from your account after the firm fails, that's when SIPC will step in and protect your money up to a certain amount.

Here are the protections: SIPC will give you up to $500,000 per account. When it comes to a traditional savings, checking, CD or money market account, as an individual, your deposits are insured up to $100,000 in an FDIC-insured bank. Joint accounts are insured up to $200,000. IRAs and Keoghs - retirement plans for people who are self-employed - can be insured up to $250,000. These retirement accounts are considered separate from your individual bank accounts.

If you're worried you don't have enough insurance on your accounts, the FDIC Web site has a tool that will allow you to calculate your insurance coverage. It's called the electronic deposit insurance estimator - or EDIE for short. You can also call the agency at 877-ASK-FDIC.

3. Take heart

Over the last few years financials had become one of the most important drivers of the S&P 500 and by extension index funds then it impacts your 401(k).

Remember that anything that brings confidence to this sector is good - but a well-performing financial sector is also critical to something more fundamental - an economic recovery.

Without the ability to get loans or finance debt there is no way for corporations to expand and hire more people.

So while now there's a lot of uncertainty and fear out there in the markets, this financial shakeout could be exactly what's needed to put the economy back on the right track. To top of page

Gerri's Mailbox: Got questions about your money? We want to hear them! Send e-mails to toptips@cnn.com or click here - each week, we'll answer questions on CNN, Headline News and CNNMoney.com.
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