Money guarantees.

In the great depression of the 1930's many banks - including state savings banks - closed their doors and declared bankruptcy. As a result, many of today's older citizens still mistrust banks and prefer to keep their savings " under the mattress ".

When this latest recession threw the financial world into panic the Australian government was quick to offer a guarantee that it would stand by depositors. Money held on behalf of Australian citizens had a government promise that it would be repaid in the event of a bank failure.

The recession is said to be over and the Federal government is now recalling that guarantee. It will no longer apply to deposits in excess of one million dollars, but deposits of less than that amount will still be protected - until 2011.

There is just one small fly in the ointment ! When the deposit guarantee was first announced it was also extended to money held in building societies and credit unions because to restrict it to banks would have seen a panic flight to these bigger and safer institutions.

Few would think that our " big four " banks are in any present danger of insolvency, but that may not be the case with the plethora of much smaller savings and lending institutions that are now losing this guarantee protection.

It is a very good reason for any prudent customer to take a long, hard look at the balance sheet of any lesser money market operators to ensure they measure up before making an investment choice.

Certainly a valid reason to stop and think before the money guarantee ends in 2011.