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62% of Americans Have Under $1,000 in Savings, Survey Finds

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Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#71

Post by sleazebreeze »

eimai134 wrote: post #13

I'll bet a lot of people have money elsewhere. However, I have a lot of friends who are poor (by that I mean that they qualify for food stamps), and it's amazing to see the way they spend money. When I was poor I bought the very cheapest shampoo ($1) and bought generic everything. The poor people I know now buy name-brand products and buy a ton of Christmas and birthday presents. My husband and I have savings but we…

My partner's family lives in government subsidized housing and they get the full array of benefits including disability and food stamps. His mother buys new luxury items like purses from Coach regularly with cash from under the table jobs. They have more TVs, newer smartphones and iPads and lots of other expensive goods, and yet they have zero savings. I don't understand the thinking there.

I just hope their retirement plan isn't to live with my partner and I.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#72

Post by Symmetry »

Laaw wrote: post #36
tootie wrote: post #34

Earlier quoted context omitted.

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.

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.

If the stock market falls by even just 80%, which is probably the minimum I'd call "wiped out" then things are bad enough that your savings account can't be trusted either.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#73

Post by scott_karana »

Laaw wrote: post #54
beambot wrote: post #44

Earlier quoted context omitted.

What? Let's assume he's intelligent and has good diversification (eg. he mentioned bonds, stocks, home, and cash -- probably in a investment account). If all his financial positions got "wiped out" in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless. In the meantime, he has a home to live in. Plus, most investment accounts give you easy access for withdrawals (eg. debit cards) or…

You're the second person to say this, but how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.

> in a broad-sweeping financial collapse, then "cash in savings" would be equally worthless.

> how would "cash in savings" be equally worthless? Maybe I'm not understanding, but it's pretty difficult to actually lose money in a savings account, that's the whole point.

The cash wouldn't be lost, but it would have reduced purchasing power in a recession. And if inflation is steep, you're actively "losing" money.

It would be "worthless" in the context of long-term investing, because nothing would have long-term worth.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#74

Post by forgetsusername »

cko wrote: post #17
patio11 wrote: post #5

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 savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

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" fact…

>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.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#75

Post by antimatter »

Nadya wrote: post #58
deckard1 wrote: post #43

Earlier quoted context omitted.

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'…

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 b…

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.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#76

Post by ChuckMcM »

Laaw wrote: post #36
tootie wrote: post #34

Earlier quoted context omitted.

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.

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.

I think you're confusing loss of value with loss of savings. So if your stocks lose half their value, then you now have "less cash equivalent savings" but you still have savings. Even in the dot com crash (where I was not diversified and had a lot of tech stocks) the reduction in value across the board was, in aggregate, about 70% even though some stocks it was 99.9%. But all of that was "ok" because I didn't need that money to live on, it was "savings".

Similarly with house values, if you own your home outright it doesn't matter if the real estate market crashes, you can still live there. But it might make moving less desirable (or not if you can find a good deal somewhere else).

The article is talking about people who find themselves unable to pay for repairing a vehicle after an accident without going into credit card debt. That can start a spiral into insolvency.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#77

Post by joering2 »

patio11 wrote: post #5

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 savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

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.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#78

Post by joeyo »

ngokevin wrote: post #33
patio11 wrote: post #5

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 savings accounts as priorities is because in the current interest rate environment savings accounts and CDs are products with vanishingly little to recommend them. The APY my bank offers is one basis point . That's $1 per year for every $10k held in the account.…

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.

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%.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#79

Post by dangrossman »

ryandrake wrote: post #69
tootie wrote: post #34

Earlier quoted context omitted.

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.

Curious, not criticizing: What is your plan if you get sick or laid off, or for some other reason need a large amount of cash immediately? I always thought it was common advice to keep ~6mo living expenses in cash savings for emergencies.

You sell the stocks and bonds and have cash the same or next day. You can also take a home equity loan.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#80

Post by JustSomeNobody »

Less than 86% even have enough for a proper emergency fund. This is very sad.

Either they have found a place to put it other than a savings account (which we all know doesn't provide even enough interest to cover inflation), or people are in a world of hurt right now.

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