What Do Russia and Mary Poppins Have in Common?

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Tuppence?

My Money Rehab podcast production team and I had a conversation recently about this scene in Mary Poppins:

If you watched this movie as a kid, this scene might very well have been your first impression of a bank. I’m going to go ahead and say that’s not a great first impression.

The author of Mary Poppins— Pamela Lyndon Travers AKA Helen Lyndon Goff— definitely had some emotional baggage around banks; her father was a bank manager, but was eventually demoted to bank clerk, allegedly because of his issues with alcoholism. So there’s a lot to unpack there.

Bank on it?

Here’s my take: I’m pro-keeping-your-money-in-a-bank, although I’d be the first to admit that there is some major room for improvement in the banking system. It is better for your financial self to have money in the bank instead of under your mattress. However, things can go wrong. This scene in Mary Poppins isn’t entirely fictional. Similar scenarios have actually played out in the real world, and often enough for this phenomenon to have a name: bank runs.

A bank run is essentially a scenario in which a bank needs to slow down operations, or even default, because there is a significant increase of people making withdrawals. Essentially, it's too many people asking for the money that's in their accounts, which doesn’t seem like it should be a problem; but, it becomes a problem when people are asking the bank for more money than it has to give. This situation is possible because of the way banks keep their reserves. Even though we like to picture our bank as having stacks of our money locked up in a vault with our name on it, that’s not actually how it works. In fact, banks really only need to maintain 10% of bank deposits on them at any time.

But just because a bank doesn’t have all of your money available to you right when you want it, doesn’t mean your money doesn't exist. If you belong to a FDIC-insured bank, your money is insured up to at least $250,000 per depositor. So your money won’t disappear. But, it could be harder to access in the case of a bank run.

And, newsflash, bank runs can be caused by other situations beyond a greedy man in a top hat. Bank runs occur when there’s some sort of economic panic— it could be that there's some public issue with a bank, and members worry that they will not be able to liquidate their account if they need to, so they try, and inability to liquidate their account leads to more panic, which makes it harder to take money out, and on and on. And yes, that is the Mary Poppins scenario. A bank run could also be caused by a nation-wide issue, and affect several banks, which is what happened in Russia a few months ago.

In late February, days after Russia’s invasion of Ukraine, it looked like there may be bank runs on Russian banks. According to City Journal, there was widespread fear that there would be withdrawal limits applied in banks and at ATMs, and concern that credit cards and electronic means of payments will stop working.

Consequently, there was a huge swell of Russians trying to take out money from their bank accounts. Russian banks reported that they had experienced significant outflows of deposits in a very short time, and lines at ATMs were unusually long.

In an effort to prevent a bank run, the central bank in Russia applied some limitations— including capital controls to limit how much money could leave the country. And that seemed to have put a bandaid on the issue, but since the invasion of Ukraine, Russia has been rocked by economic sanctions, a volatile currency, and even worse inflation than we’re experiencing in the US. So, it will be interesting to see what other bandaids are put on the economy to try and keep everything together.

My two cents?

Again, I do think that you need to use a bank as the primary home for your money. However, I also think that it’s a good idea to always have a little cash stash just in case. And I mean literal cold, hard, green, physical cash— somewhere easily accessible to you. I do not see a Mary Poppins reenactment in our future any time soon, but let’s all be good Boy Scouts and be prepared.

xo,

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