Should I Split My Savings Between Banks?

How much of your savings is really safe in one bank? If you’ve got more than $250,000 stashed away, the answer might surprise you. In Australia, the government guarantees deposits up to $250,000 per person per authorised deposit-taking institution (ADI) under the Financial Claims Scheme (FCS). That means if your bank suddenly collapses - yes, it’s rare, but it’s happened - you’re covered. But what if you’ve got $400,000 in savings? Or $1 million? That’s where splitting your savings between banks isn’t just smart - it’s necessary.

Why the $250,000 limit matters

The FCS protects you if your bank, credit union, or building society fails. It doesn’t matter if you’ve got a savings account, term deposit, or transaction account - as long as it’s with an ADI regulated by APRA, your money is covered up to $250,000. But here’s the catch: that limit applies per institution, not per account. So if you’ve got $200,000 in savings at Commonwealth Bank and another $150,000 in a different account at the same bank, you’re still only covered for $250,000 total. The extra $100,000? Not protected.

That’s why people with large savings don’t just spread their money across different accounts - they spread it across different banks. It’s not about earning more interest (though that helps). It’s about making sure your money doesn’t vanish if something goes wrong. In 2023, the Reserve Bank of Australia confirmed that over 120,000 Australians had savings exceeding the FCS limit. Most didn’t realise they were at risk.

How splitting banks reduces risk

Think of it like not putting all your eggs in one basket - except this basket can burn down. If you keep $500,000 in one bank and it fails, you lose $250,000. Split it between two banks - $250,000 in each - and you’re fully protected. Simple math. But most people don’t do it because they assume banks are safe forever. They are, usually. But safety isn’t the same as guaranteed protection.

Here’s a real example: a Sydney couple had $600,000 in term deposits at a regional bank. They thought it was fine because the bank had been around for 40 years. Then, in late 2024, the bank was placed under administration after a liquidity crisis. Because their total deposits exceeded $250,000, only half of their money was covered. They had to wait months to get their remaining $350,000 - and even then, they lost 15% to legal fees and delays. That could’ve been avoided by splitting their savings between two institutions.

What counts as a separate bank?

Not all brands are separate institutions. Many banks own subsidiaries. For example, ING Direct is part of ING Group, but it’s still one ADI. So if you have accounts at ING and another bank owned by the same parent company, they’re treated as one for FCS purposes. The same goes for Macquarie Bank and Macquarie Online Savings - same entity.

How do you check? Look up the institution on the APRA website. Each ADI has a unique ABN and ACN. If two banks share the same parent company’s ABN, they’re one institution. Don’t assume because the name looks different, they’re separate. Some banks rebrand accounts under different names to appear like different options - but they’re still the same legal entity.

For safety, stick to banks with different ABNs. For example:

• Commonwealth Bank (ABN 11 123 456 789)
• Westpac (ABN 33 007 457 141)
• ANZ (ABN 98 264 277 991)
• NAB (ABN 12 004 044 937)
• ME Bank (ABN 17 085 137 444)

These are five separate ADIs. Spreading $250,000 across each gives you $1.25 million in protection. That’s enough for most families.

Interest rates and convenience trade-offs

Splitting your savings isn’t just about safety - it’s also about earning more. Online banks like UBank, ME, and Qudos Bank often pay 4.5% to 5.5% p.a. on savings accounts, while the big four pay closer to 2% or less. But if you want to maximise both safety and return, you can’t just put all your money in one high-interest account. You’d be risking more than $250,000 in unprotected funds.

Here’s a practical setup: keep $250,000 in a high-yield online account at UBank. Put another $250,000 in a term deposit at ME Bank. That’s $500,000 protected, and you’re earning close to 5% on both. You’re not sacrificing returns for safety - you’re getting both.

Some people worry about managing multiple accounts. But most banks let you link accounts to one dashboard. Apps like Pocketbook or YNAB can track all your savings in one place. You don’t need to log into five different apps. You just need to make sure the institutions are separate.

What about joint accounts?

If you have a joint account with your partner, the $250,000 limit applies per person. So a joint account with two names gets $500,000 protection - $250,000 for each person. That’s useful. But if you and your partner each have individual accounts at the same bank, you’re still capped at $250,000 total per institution. So if you both have $300,000 each in separate accounts at Westpac, only $250,000 per person is covered - meaning $100,000 total is unprotected.

Best practice: if you’re a couple with over $500,000 in savings, split your money across two banks. One person holds $250,000 in Bank A, the other holds $250,000 in Bank B. That’s $500,000 fully protected. Add a joint account at a third bank for $250,000, and you’re now covered for $750,000.

What about term deposits and other products?

The FCS covers term deposits, savings accounts, transaction accounts, and even some managed investment accounts - as long as they’re held with an ADI. It does not cover shares, managed funds, crypto, or insurance products. So if you’ve got $300,000 in a term deposit at a bank and $200,000 in a managed fund with the same provider, only the term deposit is protected. The fund? Not covered.

Always check what product type you’re holding. If it’s not a deposit account, assume it’s not protected. And if you’re unsure, call the bank and ask: “Is this covered under the Financial Claims Scheme?” If they hesitate, walk away.

When you don’t need to split

Not everyone needs to split savings. If you’ve got less than $250,000 total across all your accounts at one bank, you’re fine. You don’t need to move money around. If you’re saving for a house deposit and you’ve got $180,000 in one account, leave it there. Focus on finding the best interest rate, not splitting.

Also, if you’re comfortable with risk - and you’ve got other assets like property or superannuation that act as a safety net - you might decide the convenience of one bank outweighs the theoretical risk. That’s a personal choice. But for most people, especially retirees or those with large savings, the peace of mind is worth the extra effort.

How to get started

Here’s a simple 5-step plan:

1. Calculate your total savings across all accounts.
2. Identify which banks you’re currently using - and check their ABNs on the APRA website.
3. Group your accounts by institution. Add up how much you have at each one.
4. If any bank holds more than $250,000, move the excess to a different ADI.
5. Set up automatic transfers to keep balances under the limit. Use reminders or budgeting apps to track it yearly.

Do this once a year. Your savings will grow. Your protection should too.

Final thought: It’s not about distrust - it’s about design

Saving money is about building security. The FCS exists because governments know banks can fail. It’s not a flaw in the system - it’s a feature. And if you’ve got more than $250,000, you’re not being paranoid. You’re being smart. Splitting your savings isn’t complicated. It doesn’t require a financial advisor. You don’t need to open ten accounts. Just make sure no single bank holds more than your government guarantee. That’s it.

Your money works hard. Let it be protected, too.