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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

#131

Post by segmondy »

pyrrhotech wrote: post #124
nostromo wrote: post #10

Earlier quoted context omitted.

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.

Agreed, I'd answer $0 because I don't have a savings account. Even if they asked in all bank accounts, it would be about $1500 or less depending on the day of the week. Yet I own a home with 50% equity, a car and have a 6 figure retirement account and separate 6 figure taxable account. What they really should ask is what is your net worth or at least what is your liquid net worth, but I suppose that would be confusin…

Nopes, folks would count their home equity, furby, baseball cards and figurine collections into their net worth.

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

#132

Post by enoch_r »

misiti3780 wrote: post #82
runako wrote: post #45

Earlier quoted context omitted.

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

Since June 2009, when that interview was conducted, the S&P500 has more than doubled, not including dividends, so I hope he switched back or he did, in a sense, "lose" 50%.

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

#133

Post by ngokevin »

joeyo wrote: post #78
ngokevin wrote: post #33

Earlier quoted context omitted.

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%.

Of course, but if you're going to have any sort of savings account, might as well have a higher-yield one.

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

#134

Post by jacobmarble »

beambot wrote: post #83
hugh4 wrote: post #37

Earlier quoted context omitted.

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...

Yet another excellent read from MMM.

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

#135

Post by forgetsusername »

mod wrote: post #92
forgetsusername wrote: post #74

Earlier quoted context omitted.

> 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 oppo…

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.

>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.

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

#136

Post by antientropic »

scott_karana wrote: post #73
Laaw wrote: post #54

Earlier quoted context omitted.

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 wou…

Why would the cash have reduced purchasing power in a recession? Sure, that would be the case if there was high inflation, but that certainly wasn't the case with the 2008 crisis.

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

#137

Post by ghaff »

derekp7 wrote: post #123
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'…

But the balance for those not sophisticated enough to invest on their own is 401k. And many jobs [citation needed] (at least the ones I've been at) automatically start you off at 3% contribution, and they will automatically increase it by 1% every year (up to 6%), coinciding with your raises, if you do not tell them to do otherwise. Plus, they will put it in a target fund based on your estimated retirement age (ex. 2…

Sounds like those companies have been reading Richard Thaler (behavioral economist who advocates such nudges). That sounds pretty much exactly like the sort of program he advocates for. As far as I know, it's not very common though. I've never seen it at any rate.

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

#138

Post by fancyketchup »

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.

Because the set of events that could "wipe away" your (reasonably-intelligently diversified) assets has a large intersection with the set of events that could "wipe away" your saving account in a bank. Things like nuclear war, global pandemic, etc.

Yes, the FDIC does insure savings accounts, but that's only useful so long as the FDIC exists.

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

#139

Post by slig »

sliverstorm wrote: post #118
hugh4 wrote: post #37

Earlier quoted context omitted.

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.

Although there's something special about the responsibility of having your very own account, very own card, very own PIN...

Then you can deposit an "decent interest rate" manually on their account.

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

#140

Post by patejam »

mod wrote: post #108
arbitrage wrote: post #85

Earlier quoted context omitted.

You should be able to pay off your mortgage and still maintain & increase savings. If you can't, you have too much mortgage.

Is there a reason, generally speaking, why you shouldn't use the excess money to pay off your mortgage faster, rather than increasing savings? (Assuming you already have enough savings to cover emergencies etc)

If your mortgage interest rate is less than your investment account rate.
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