You’re right to want your money safe. You might be paying $25,000 a year for safety you already have.
You know someone who does this. Maybe they remember 2008. Maybe a bank failure touched their family. So they divide their savings among banks, trying to keep every account insured. Send this to them without calling their caution foolish. The caution is right. The expensive part is where the money sits.
FDIC insurance covers eligible deposits up to $250,000 per depositor, per bank, per ownership category. That cap makes three banks a familiar home for $750,000. It also makes the interest rate on each account matter. Safety isn’t the same thing as a good rate.
Take a plain example: $250k each at three banks earning 0.5%, 0.3% and 0.1%. That’s $2,250 a year. The same $750k in SGOV at 3.67% (Sep 24, 2026): $27,525. The gap is roughly $25,000 a year - illustrative rates, dated yield, before taxes and costs.
The comparison doesn’t depend on a bad bank. A savvy ladder of 4.25/3.75/3.25 averages 3.75% pre-tax - slightly MORE than SGOV’s dated 3.67%. In a high-tax state, the after-tax order can reverse on SGOV’s state exemption - but that’s a $3-4k story, not another $25k loss. Don’t use the big number on someone already earning competitive rates.
Why can Treasuries skip the hopping? FDIC covers a bank’s promise to repay, up to a limit. Treasuries are the government’s own obligations - no per-bank cap, no $250k ceiling. SGOV holds them through an ETF: market price, a spread, no FDIC guarantee. Not a reason to empty checking or pretend a brokerage is a bank account.
If the point of three banks is “I won’t leave $750k uninsured at one bank” - I get it. First read each account’s APY. Keep what you need right away in the bank. Compare the rest against Treasuries on after-tax income and when you need to spend it. You may be paying dearly for the familiar form of safety.
You know the person with three savings accounts and a spreadsheet of FDIC limits. Send them the math, not a lecture. Ask what their accounts actually pay. Their answer decides whether this is a $25,000 problem, a smaller tax problem, or no problem at all.
Assumptions
The big number applies to low-yield accounts, not to everyone who uses insured deposits.
- Insurance: FDIC coverage is $250,000 per depositor, per insured bank, per ownership category. Three $250,000 balances assume three different insured banks and valid account ownership. Accrued interest and other balances in the same category can matter; three accounts at one bank do not create three limits.
- Low-yield example: $250,000 x (0.005 + 0.003 + 0.001) = $2,250 annually. $750,000 x 0.0367 = $27,525. Difference = $25,275, rounded to roughly $25,000. The bank rates are examples; SGOV’s 3.67% is the article’s September 24, 2026 snapshot. Rates must remain constant for a year to produce those annual amounts, before taxes and costs.
- Competitive banks: Equal balances at 4.25%, 3.75% and 3.25% average 3.75%, or $28,125 pretax. That beats the dated SGOV input by $600 pretax. The $3,000-$4,000 tax-gap discussion needs the investor’s actual state/federal rates and SGOV’s qualifying state-exempt income share; no single after-tax outcome follows from these yields alone.
- Risk and access: Treasuries and an ETF holding Treasuries are not FDIC deposits. The comparison must include market price, spreads, taxes, settlement and withdrawal needs. The reference to 2008 is historical context, not an assumption about the next failure.
Have better inputs, a missing cost or evidence that changes the result? Share it . We will update our assumptions and conclusions to reflect the most accurate representation.