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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

#321

Post by astrange »

ryandrake wrote: post #245
rtkwe wrote: post #91

Earlier quoted context omitted.

Stocks are a pretty liquid asset in those cases. And for things where the need for money is sooner than a sale would go through it could be put on a Amex/credit card and paid at the end of the month. Totally guessing but they've also probably got a fair amount of money in a checking account as their 'cash on hand'.

But stocks are risky. Murphy's Law strikes and your stocks are all down 10% when you need the money the most. That doesn't sound like the way to go for an emergency fund.

Stocks and bonds of all kinds are available as ETFs that can be sold anytime. And you almost certainly don't need to sell the whole thing at once, so running low on principal value isn't that much of a problem. (Instead it's a tax break.)

https://www.betterment.com/resources/personal-finance/safety...

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

#322

Post by AjithAntony »

ChuckMcM wrote: post #55
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.

That was what I was wondering as well, since savings accounts are such poor vehicles for saving these days in terms of a return I'm sure a lot of people just leave the money in their checking account. That said, its really really important that if you can't save some money every month, and don't accumulate savings year over year (those are importantly different things!) That is a signal that you are living beyond you…

In fact they are probably better off in checking because a lot of banks offer ridiculous benefits like high interest on checking in exchange for swiping your debit card 5-12 times a month.

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

#323

Post by astrange »

scoreponok wrote: post #246
enoch_r wrote: post #132

Earlier quoted context omitted.

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%.

This is hindsight bias. The markets could have easily went the other way. Market timing is notoriously futile. If you want to play "what if?" and pick arbitrary dates then he could have as easily put his cash position into equities lets say beginning of October 2008? Then his advice would seem very wise indeed.

Even if he'd done that he would be better off than using a savings account.

http://dqydj.net/sp-500-return-calculator/

Picking arbitrary dates to buy a lot of equities and then not selling them isn't market timing; trying to trade repeatedly on the right dates is. That's how you lose all your money.

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

#324

Post by megablast »

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...

> he gets occasional cash gifts from relatives and a salary from me that consists of 10 cents for every mile walked or biked as part of family life

Hmm, not sure if you are serious, but this ain't great.

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

#325

Post by AjithAntony »

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…

Investigate the "robo advisors" like betterment and wealthfront. You are exactly their target audience. You can safely ignore the general FUD you will read about their fees. The people writing that it costs too much are far more sophisticated than you and have traded a great deal of their time researching investing to be able to invest "cheaper" on their own. If you are extremely price sensitive, then you should look at wisebanyan which is "free", or use a referral link to join wealthfront to get the first $15k managed "free".

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

#326

Post by astrange »

Avshalom wrote: post #251
brianclements wrote: post #29

So many people live paycheck to paycheck that saving is just this intangible concept that "wealthier" people do. No one they know saves, no one taught them to save growing up, and even if they tried, they probably couldn't. Cost of living has outmatched wage growth; it's a mess. On the personal responsibility side of it though, I'm willing to bet that over recent decades, another thing that has also inflated is many…

>, and even if they tried, they probably couldn't For instance near as I can tell it takes like 10 grand to get into an index fund. Even if that didn't represent years of savings for most families there are so many things that 10 grand needs to be used for before [[2-5%/y return on investment over 20-30 year period IF the market doesn't crash shortly before you need to start drawing on it]] is a compelling propositio…

$10k is the starting investment for the nicer classes of some mutual funds, but those are completely obsoleted by ETFs. You can buy those as soon as you have $50 for one share and brokerage fees.

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

#327

Post by AjithAntony »

lmm wrote: post #302
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.

I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free. Am I being dumb? It's quite possible there's something I've missed.

Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.

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

#328

Post by AjithAntony »

lmm wrote: post #302
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.

I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free. Am I being dumb? It's quite possible there's something I've missed.

Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.

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

#329

Post by kamaal »

branchless wrote: post #184
beambot wrote: post #181

Earlier quoted context omitted.

How does owning rental properties invalidate his message of "avoid rampant, unnecessary consumerism"? Certainly, not everyone can derive their retirement income from rentals (the numbers don't work out). But lucky for you: There are other forms of investment. BTW: I currently rent. It's the financially prudent thing to do in my situation, and I certainly don't begrudge my landlords for it -- they're the ones locked i…

Because rampant consumerism isn't the issue. Most families are responsible with their money. Their greatest expense? Rent/mortgage which is pushed up by: 1. bankers issuing insane amounts of debt that out-pace wages 2. speculators borrowing from said banks to "invest" in pushing up living costs for families (ie people like MMM) The media loves to portray people as feckless idiots but the real problem is economic rent…

>>Because rampant consumerism isn't the issue.

Sorry to break the bad news to you, but rampant consumerism actually is the issue.

>>Most families are responsible with their money.

No, in fact their spending decision don't even remotely reflect any sense of responsibility.

>>Their greatest expense?

If you think, smaller delta spending doesn't matter. Alas, I'm sorry that's the whole point behind indulging into consumerism without even realizing you are.

>>Rent/mortgage which is pushed up by

Demands.

>>bankers issuing insane amounts of debt that out-pace wages

You always have the option to move to the city outskirts, where houses are affordable. It will take more effort to commute and all, but cheap has to count for something. And you could save money to borrow less.

>>real problem is economic rent extraction by people who are adding zero value to society.

Houses don't get build out of fairies dropping suitcases full of money outside people's houses. They earn it, work for it. And make investments.

You are all welcome to invest and grow. But just because you don't want to, it doesn't make others greedy and evil.

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

#330

Post by morgante »

toomuchtodo wrote: post #313
morgante wrote: post #267

Earlier quoted context omitted.

> An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, as I've never encountered one. Insurance companies invest their premiums. Why shouldn't I?

Insurance companies and banks are required to maintain a minimum amount of safe/liquid (read: cash) reserves. > I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? Even money market funds have broken the buck before (~2008).

> Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market?

My point is emphatically not that your stocks will maintain their full value. But even at their lowest, their value will be more than enough to cover any emergency fund. A 50% drop on $100k will still leave you with $50k.

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