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There's a conversation to be had about many Americans living in precarious financial situations, but the reason why most Americans don't currently view their sa

• gipp 11y ago
  Well, they offer liquidity. I keep one for emergency living expenses; there's no real advantage over leaving it in checking, I guess, other than as a unit of organization, to explicitly mark it as "emergency funds".
  • steve-howard 11y ago
    I do this too. Funny enough, my checking account earns a higher rate on the first $10k than my "savings" account, but I use a split direct deposit to grow my emergency savings and then try not to look at the savings account to reduce the temptation to use it.
• deleted 11y ago
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• vvanders 11y ago
  I'd be surprised if it's just savings percentage driving this. As tech workers we're a bit more privileged in that we have access to salaries and opportunities that a lot of America doesn't have. Less than 6 years ago I was very much in that 62% category as high cost of living was eating into our combined paycheck pretty heavily.
  • Shivetya 11y ago
    A lot of people get into the dangerous mentality that since the interest rates are not high that it somehow makes saving not a good idea, similar to many people in our industry who won't max out their 401k simply because the employer does not fully match. With regards to savings and lack thereof, regardless of salary. Far too many people excuse themselves from budgeting because they believe they are stretched too far to benefit. Yet the primary benefit of a budget is to understand where all your money is going, from major bills to day to day expenses; which can be a simple as that morning coffee or a pack of gum. Knowing where your money is going is the first step to getting yourself out of debt and a bad situation.
    • HLRoku 11y ago
      Correct me if I'm wrong but I thought the point was that savings accounts are not worth it, leading many people to say their saving accounts are barren, not that they don't have savings saved up. Personally I'd fall into that category, I put all my money in checking since the interest is so poor in savings accounts I'd rather see that money go to some retirement fund or investment than see it get so little return in interest and restrict how much money I can take out of the account at any given time.
      • maxerickson 11y ago
        A big chunk of people just don't have any money held in reserve: https://news.ycombinator.com/item?id=10354263 https://news.ycombinator.com/item?id=10354263
        • HLRoku 11y ago
          Well, that's depressing. Almost hard to believe, to be completely honest -- but I might just be around the right group of people?
• nostromo 11y ago
  Also, the article title is very different than the actual survey question: > How much money do you have saved your savings account? That's a very specific question. A person with $5k in their checking account or a person with $100k in a retirement account might still answer that they have no savings.
  • tootie 11y ago
    My net worth is probably top 5% or so and I haven't even had an open savings account in 10 years. Cash on hand or it's invested in stocks, bonds and my home.
    • Laaw 11y ago
      You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in.
      • HLRoku 11y ago
        I don't really follow how having money in stocks, bonds and a house is somehow capable of being wiped away by the market when a savings account in a bank wouldn't be in dire straits with such an economic upheaval to render those 3 investments useless
        • Laaw 11y ago
          I'm sorry you don't follow, but it should be fairly obvious that stocks can crash, bond markets can collapse, and home prices can plummet, whereas money in FDIC insured savings accounts would only be lost in the event of a catastrophic, country-jeopardizing event, in which case we'll all have bigger problems. I'm not meaning to attack anyone personally, I just think this survey is trying to suss out what percentage of Americans are in a position such that an economic downturn would hurt them severely. I also don't know much at all about finances, so take what I'm saying with a jar of salt.
• cko 11y ago
  There's something to be said for having cash available - here and there, opportunities pop up for me that I can take advantage of. For example, recently I lent money at very high interest, short-term. If I suddenly get interested in prototyping electronics I won't even hesitate to buy an Arduino, sensors, and a few books. Little bits of cash is useful to "try things out." Plus there's the "better sleep at night" factor. People with little to no cash won't likely consider these things. Having that cash won't likely give you any good return, but there's the "freeing up your mind", "capitalizing on opportunities", and "sleeping better" things to consider.
  • forgetsusername 11y ago
    >There's something to be said for having cash available - here and there, opportunities pop up for me that I can take advantage of. But, by definition, every time you take advantage of an opportunity, you sacrifice cash on hand. You can't always have cash on hand and always be able to take advantage of opportunities, unless you have infinite money. They are opposing forces; your money is either "in cash" or "in opportunities". It reminds me of arguments to have "dry powder" to buy equities when there is a market correction. But that means you're sacrificing current returns for potential future returns, and unless you can anticipate the future market results, the results of the strategy are ambiguous.
    • mod 11y ago
      What? You don't have to take advantage of every opportunity. I generally buy anything that sparks my interest, and manage to bank a lot more cash than I spend.
      • forgetsusername 11y ago
        >You don't have to take advantage of every opportunity. That's irrelevant. The point is, strategies like, "always have cash on hand to take advantage of opportunities" don't really make sense, because the more you do of one means the less you can do of the other. This is economics in a nutshell; determining the tradeoffs between two scarce resources, in this case cash and "opportunities". The solution isn't "more of both" unless the resources are infinite.
• sbuttgereit 11y ago
  Don't forget, our government also encourages spending. Indeed, consider the entire premise of Keynesian Economics where the answer is stimulate demand (spending/consumption) over capital accumulation. Both major political parties buy into this idea. Cars for Clunkers was about new sales: taking a possibly working asset, albeit an older one, and trading it in (with cash) on newer cars. Interest rates are part of this and there are even suggestions going around now for negative interest rates. Why? To make savings less attractive and spending moreso. Completely predictable and what our leaders want.
• Spooky23 11y ago
  If you need liquid savings, cash is king. I opened a savings account with my son a few weeks ago. In my day, those accounts paid 3-7%. There was a story of compounding interest to tell. Now, I feel like I'm teaching my kid to be a sucker.
  • hugh4 11y ago
    I think if I ever have a kid I'll let him open a "bank of Dad" account which pays a decent interest rate just to get him into the habit of investing.
    • claar 11y ago
      Thanks -- I'm stealing this great idea.
    • beambot 11y ago
      Best example ever: http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-my-son-about-money/ http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-m...
      • jacobmarble 11y ago
        Yet another excellent read from MMM.
        • branchless 11y ago
          How many rental properties does he have? Think he just survives on being frugal and dollar cost averaging? Think again.
          • a_c_s 11y ago
            He publishes his family's spending every year: http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-familys-2014-spending/ http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-fa...
• thibaut_barrere 11y ago
  I'm curious about that - isn't it also culture-driven (spending habits) or maybe linked to education costs? For instance in France, where "CD" equivalent (DAT) rates are fairly low as well currently, the saving rate (ratio between what is added to savings monthly, and monthly revenue) is 15.1% in 2014 (source: INSEE [1]). Also, still in France, people will save /even/ if the interest rate is low. [1] http://www.insee.fr/fr/themes/tableau.asp?reg_id=0&ref_id=nattef08148 http://www.insee.fr/fr/themes/tableau.asp?reg_id=0&ref_id=na...
  • walshemj 11y ago
    But what are the counting as saving purely cash or does that include securities. I am sure that in the UK that stocks and share ISA's are counted as savings
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• ngokevin 11y ago
  Why not move your savings account to a different bank? If you are in the US, Discover or Ally banks offer nearly 1% APY. $100K would yield $1K per year.
  • joeyo 11y ago
    Even 1% is still abysmal. Some of that 100k should be in cash, because liquidity is useful, but long-term returns on capital should be much closer to 5%.
    • ngokevin 11y ago
      Of course, but if you're going to have any sort of savings account, might as well have a higher-yield one.
    • ansible 11y ago
      Yes, 1% is bad. The "official" rate of inflation is low, but I think that it is bogus. Maybe pizza and cars haven't gone up in price much in the last decade, but other big things (such as education and health care) have.
      • mywittyname 11y ago
        The official rate of inflation is intended to be a measure an increase in the overall money supply; it's an average. The increased cost in certain segments is offset by deflation in other segments. While the healthcare market is booming, the energy sector has been decimated. In other words, life sucks if you're a sick oil worker, it's awesome if you're in medicine or production.
• deckard1 11y ago
  I don't think that's the case here at all. You're talking about people that are both savvy enough to have a savings account and familiar enough with investments to know that a savings account is bad compared to other investments. On top of also knowing another place to put their money (many people completely fear the stock market and all index products). The average American is just not sophisticated at all here. We're talking about a nation that isn't familiar with balancing a checking book (thanks to debit cards everywhere). Many people that can invest elsewhere simply don't. Because they do not know about investing. They may be lawyers or doctors. But their money just accumulates.
  • Nadya 11y ago
    This is the situation I am in. I'm not savvy enough to make investments that have meaningful or significant returns - so it all goes into a savings account. I have 1 years' expenses saved and it just slowly accumulates because I don't know how to make a safe return on it. I don't want to invest say, 3 months savings only to lose it... Definitely the "play to not lose" mentality rather than a "play to win" mentality but I see little reason to change that behavior.
    • antimatter 11y ago
      I'm in this exact same situation. I have very little trust in my knowledge of any other form of investing. Would much rather take the safe route.
      • ryandrake 11y ago
        It makes sense to hold savings in a savings account or CD if you're worried about risk of loss. The stock market is very volatile and you can lose your shirt if you don't know what you're doing. Ask me how I know this.
    • nemo44x 11y ago
      You are actually taking on more risk than if you had some invested in different vehicles. The truth is you're losing more money by not having any of it generating higher potential yields. Likewise, putting all your money in higher yielding vehicles (for instance, call options) is a lot of risk too. There's a calculus to understanding how much you should have put into different vehicles (including cash in a savings account) to take on the most conservative position. The way you're playing is you are forfeiting and losing by taking on more risk than you think. It's weird to think about but you need to factor in inflation and cash becomes worth less when it is just sitting there. It isn't volatile but it is mainly deterministic. Some diversity in your arrangements would protect you better.
• bdcravens 11y ago
  I think of savings as nothing but a safety net. Obviously you get past your immediate savings needs (say 3 months of expenses) and then start putting your money where it gets the best return.
• joering2 11y ago
  That's incorrect. Similar numbers you could pull during 4.5% CDs we had just a few years ago (I still have couple of those on 10 years basis that every time I go to Bank of America, rep is trying to lure me to break it and "go have fun spend it", since obviously they don't make any money on 4.5% CD 6 years old CDs anymore). Living in this country for a while, and comparing to my home Europe, I imagine US versus Europe to be like two party houses next to each other. One called "Europe", where admission is paid and when you get inside and everything you want cost money, up front. Music? Sure but you have to pay. Drinks - fine. pay before you drink. Etc. Eventually when you leave they will say "come back for more" and that's all. The party over there might be boring because invitees can only afford as much as they have in their pockets - not a lot. Versus US is totally different story. They welcome you without admission (just swipe your credit card), and party as much as you want to, virtually free. Music? Anything you want to just swipe your card. Drinks - sure, open a tab and you good to go! Everyone in US house has fun and colorful life goes on. Eventually you might seen US house being more fun, but surely more reckless with 18T in debt (T for Trillion). But also what I noticed is that a lifespan of someone's party in both houses eventually comes down to be their entire life!! So while normally when party house is getting closed down at 2am and everyone is forced to pay and leave, in real live living in USA, you party until you die and perhaps some of your debt is pushed toward your children, but that's all. So eventually you just don't care what will happen at 2am when the light are up. You be gone long before. And that "reckless" approach is what makes Americans don't want to safe. Eventually, there are just not enough incentive to save. Also, in Europe a person cannot bankrupt, only corporations. That makes a bit difference.
• deleted 11y ago
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• bmm6o 11y ago
  Absolutely. At one point I had $10,000 in an ING Direct account. I wasn't getting rich off the interest, but the money was safe and accessible if I needed it, and seeing a few hundred bucks in growth in a year was satisfying. The APY rate went down literally every month, and now that account is closed. That money isn't gone but it's certainly not in a savings account.
• caseysoftware 11y ago
  > the reason why most Americans don't currently view their savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. According to the US Fed[1] and Bureau of Economic Analysis[2], there is a strong correlation that implies. exactly that. 1 - https://research.stlouisfed.org/fred2/series/PSAVERT https://research.stlouisfed.org/fred2/series/PSAVERT 2 - http://www.tradingeconomics.com/united-states/personal-savings http://www.tradingeconomics.com/united-states/personal-savin...
• draw_down 11y ago
  > There's a conversation to be had about many Americans living in precarious financial situations There is! And much more interesting imo than whether the stats are borked because the savings are somewhere else than a literal savings account. Even taking this into consideration, I doubt the 62% figure improves very much.
• pnathan 11y ago
  Yes, the cautious and financially conservative Americans I know do not regard savings accounts as meaningful. They don't bother with them except as "thing that I stuff cash into that isn't in working cash".
• X-Istence 11y ago
  My bank offers 0.75% APR. For 10k I would get 6.25$ a month, or 75$ a year. Slightly more than yours, but still completely and utterly worthless in the long run.
• deleted 11y ago
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• cheriot 11y ago
  I've never wanted to downvote you before. I can relate to your complaint, but it's a distraction from the topic at hand. If "savings account" excludes retirement and investment accounts then the article means nothing. If not, your assumption that a rate of return motivates the use of savings accounts is off.
• tomsun 11y ago
  I think a good way is to split your emergency fund with cash and credit. Sock 3 months of cash and get low interest LOC to cover whatever else comes up. That way you don't get opportunity cost of saving all your money into a low interest account.
• yuhong 11y ago
  I wonder what would happen if savings accounts was ditched completely at least from for-profit banks.