What is a method Tom and Mindy can use to keep their $420,000 in cash equivalents that are federally insured?

The recommended method for Tom and Mindy to ensure that their $420,000 in cash equivalents remains federally insured involves dividing the funds into different joint accounts at two federally insured banks. This strategy allows them to take advantage of the Federal Deposit Insurance Corporation (FDIC) insurance coverage, which protects depositors up to $250,000 per depositor, per insured bank, for each account ownership category.

By splitting their cash between two banks, each joint account would have its own separate coverage, ensuring that both accounts are fully protected. This is a crucial aspect of financial planning for large sums of cash, as it maximizes the amount of money that is safeguarded from risks, such as bank failures.

While other options may seem attractive, they do not provide the same level of insurance protection. For instance, investing in stocks carries market risk and is not protected by federal insurance. Purchasing government bonds also involves risk as they do not fall under FDIC coverage in the same way that deposit accounts do. Depositing the entire sum in a single high-yield savings account only provides insurance up to the standard limit, leaving any amount over $250,000 unprotected. Therefore, the option to split the funds into different accounts at federally insured banks is the