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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

#81

Post by zardo »

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.

A market crash severe enough to whipe out stocks, bonds, and real estate, is also going to effect fiat currency. In order for the FDIC to actually cover the saving accounts for the defaulted banks, we would have to create many many new dollars.

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

#82

Post by misiti3780 »

runako wrote: post #45
Laaw wrote: post #36

Earlier quoted context omitted.

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 implicitly doing an asset allocation for the poster. > Cash on hand or it's invested in stocks, bonds and my home. That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'. Also, it's worth noting that most financial advisors do not recommend that you keep a…

everytime someone says that, I always think of a great quote by Nouriel Roubini:

"asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%."

[1] https://en.wikipedia.org/wiki/Nouriel_Roubini

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

#83

Post by beambot »

hugh4 wrote: post #37
Spooky23 wrote: post #26

Earlier quoted context omitted.

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.

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.

Best example ever: http://www.mrmoneymustache.com/2015/05/20/what-im-teaching-m...

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

#84

Post by wil421 »

cvburgess wrote: post #57
wil421 wrote: post #41

Does savings include 401k? If not then I would fall under the less than $1,000 only because I made a large purchase a few weeks ago. If I had over 10k in savings I would try to invest at least some of it in something that would give a marginal return in a few years. It would be better than just letting it sit in a savings account.

Reposting my comment to another commenter: A 40 is not liquid - if something happens and you need money tomorrow yo don't have immediate access to those funds. There may also be heavy fees if you pull funds out before you are 60.

That is true but why should I let the bank make all the money off my savings? If I were to lose my job today I could easily find a bartending job like I did in college to support myself in the time it takes to find a new job. My situation may be different than a lot of people and I live in a large city.

If I had 15k in savings to buy a house in two years I could put 10k into a CD and still make something like $300. The 5k could be for emergencies and the 10k is still more liquid than a 401k.

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

#86

Post by jsprogrammer »

Any given dollar is primarily a representation of someone else's debt. Since the number of dollars can only expand through debt, the sum total of dollars (savings) over all people will always be near 0.

You'd need most of the debt to be taken out by corporations or governments for the people to have a >0 average savings.

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

#87

Post by nemo44x »

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…

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.

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

#88

Post by beambot »

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.

He mentioned having some of the funds as "cash on hand." Let's assume it's some sort of investment (eg. sweep) account, like at Charles Schwab [1]. The funds are FDIC-insured, just like a savings account; they are also just as accessible as a savings account. But they are actually an investment account, from which you can trade stocks, bonds, etc.

Of the (mostly affluent) people I know... none of them possess a traditional savings account. Most use a checking accounts for direct deposit and a brokerage account. There's no reason to have a traditional savings account.

[1] http://www.schwab.com/public/schwab/investing/accounts_produ...

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

#89

Post by brianwawok »

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.

6 months is usually far too long to keep in direct cash / savings.

I think 2-3 months direct cash/savings/checking is fine, then move excess cash to CDs or something semi-liquid. You totally CAN get money out of CDs, just sometimes lose your interest. If you have some kind of CD ladder or such going on - you can have a new CD coming out every 1-3 months anyway, which will give you the cushion you need after savings run out.

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

#90

Post by 6stringmerc »

mikestew wrote: post #20

"Savings account"? I have $5 in my savings account to keep in good stead with the credit union. Despite that, one can rest assured that the total net worth of my wife and me is many orders of magnitude greater than what our savings account reflects. Maybe I'm out of touch, but asking about savings accounts strike as being in the same vein as asking how much I feed my horse.

I'm not criticizing, but would like to point out you may fit the definition of "asset rich and cash flow poor" and, under certain circumstances, could essentially be bankrupt due to an inability to access funds. A recent example would be the entertainer 50 Cent declaring bankruptcy in the context of a judgment totaling in the millions. Also, based on my experience on Wall Street (note: not a licensed advisor or broker), I remember when the Auction Rate Securities market collapsed, and hundreds of millions of dollars in "as good as cash" (sic) structures were suddenly rendered illiquid. I mention this simply as context for what can happen in the financial markets in undesirable scenarios.
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