62% of Americans Have Under $1,000 in Savings, Survey Finds | Hacker News Reader

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

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238 pointsgregd355 comments

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. You can imagine that if I suddenly found $100k burning a hole in my pocket I would not immediately think "Sweet! All I have to do is stuff that it the bank for a year and then I can almost afford an entire movie ticket!"

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.

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.

ITT the top 20% pat themselves on the back and imagine their life-bubbles are somehow similar to that of the poor. "It's the data that's obviously flawed."

Surely, but then you have to subtract 20% from the number in the headline.

The thing that I don't understand about this logic is that in the event of an economic downturn or disaster, if you lost your job the market would also be on the decline - the worst time to sell. Isn't it better to keep a couple month's expenses in savings, even if only for the peace of mind?

Everything has a cost - however much you're holding in cash you're effectively burning ~3% of that each year. How quickly do bills come due? If I lost my job tomorrow I could take a payment holiday on my mortgage (since I've made overpayments) and pay for food and the like with my credit card (and in my specific case as a contractor I'd have what I'd earned last month, but I appreciate that doesn't apply to everyone); I'd certainly have a few months' leeway to sell some stocks/bonds/whatever, and what you lose in a slump is less than what you gain during the boom period.

Does it matter?

Sure, consider that $10k or whatever that you need for a couple months after you lose your job. In an economic downturn, if your stocks/bonds lose half their value, it costs you $20k of pre downturn, investment dollars rather than the $10k of pre-down turn dollars if the money was in a savings account.

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.

I don't know about the poster but my investment account gives me access to it as "cash" if I chose to exercise that option, the brokerage essentially loans me the money and briefly and then sells some of the stocks in a pre-arranged priority to cover that cost. The "real" life implementation of this is that my kid's college tuition is auto-deducted from that account, so if the cash on hand balance got to 0 it would liquidate money markets, and then long term stock holdings, to cover the draft.

That said, I personally have tried to balance dividend (income) paying stocks and short term bonds (6months to 1 year) which feeds into the cash balance, so that covers some of it.

If you have a 401k you could potentially borrow against it if absolutely necessary. My plan allows 4% loans in which I pay myself the interest and a very small fee goes to the plan holder. I'm assuming the 6 months of living expenses is an extreme situation.

Well in 2009, during the real estate crash and subsequent Great Recession, people were out of work for a lot longer than 6 months. Of course financial planners don't really talk about those sorts of seismic events. That historically hasn't been an issue for engineers, but there are groups that are disproportionately affected (like older engineers).

Because I'm built the way I am I've always saved in the context of how long I could live on my savings with the goal of increasing that number until it reached infinity. That first level I call 'Raman level retirement' where you could live forever[1] off your savings if you ate only Ramen, up to the the point where you can live off your savings and keep your current lifestyle (which actually takes less income than most people thing), to actually living a more lavish lifestyle without day to day employment.

[1] Of course you intercept the life expectancy line at some point, and you have to build into your model ever increasing health care costs or a one time lump sum to emigrate somewhere that has a national health plan.

Most of my savings is invested in index funds. Pretty much all of them allow you to withdraw the full amount in 3 days or so.

Granted, do you have any idea what such a scenario might look like? Odds are, it can wait. Even large medical operations if you don't have medical insurance (where I live), simply require a modest deposit before they start the operation or expensive procedure. Though I do think they ask for some sort of proof that you have the money on hand.

But, again, most people here have enough money to pay for private healthcare insurance, or they rely on the free state hospitals.

Car, insured. Medical, insured. Bond payments, predictable.

So, I'm trying to figure out a valid plausible scenario where a large amount of "cash" is required in a very short amount of time. Any ideas?

There is a difference between liquid and volatile. Index funds are definitely a liquid instrument, but they are very volatile.

For funds that you know you will need in the next six months to three years, it is recommended to keep the funds in a liquid and very stable investment.

Personally, I use a California (I live in CA) tax free short term bond fund.

What type of expenses do I keep in this kind of fund? Tax payments I know I already owe (capital gains from an IPO for example), child's college tuition payments, planned major house repairs / remodels, pending car purchases, and as others have mentioned six months of living expenses in case of layoff or other emergencies.

Mostly medical costs or getting laid off are the scenarios I'd be worried about. Even if you're insured, medical bills add up and you tend to be billed very soon after care is provided.

In a scenario where you are found at fault in an accident (eventually / as the outcome), both legal fees and the judgment of having to pay out could put immense strain on your fiscal outlook in both the short and long term. Note I picked the word "accident" because it's something that is theoretically insured against but may not be sufficiently mitigated as a personal risk. E.g. umbrella is too small.

Sure, you could liquidate your investments if need be, but you'll get hit with high short-term capital gains taxes if you sell equities you've held for a year or less. If held longer than a year, you'll pay long-term capital gains taxes, which are substantially lower.

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.

You don't put that money in a stock market. And than it goes up by 10%. What's worse?

Either way you've lost money you could have had. Humans tend to be loss averse though.

In both situations you probably have liquid equivalents at hand

Losing 10% is clearly worse than losing 0% while watching someone else (irrelevantly) gain 10%.

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...

Even in that unlikely scenario they'd still have access to most of their money, it'd feel pretty bad to have to sell into a 10% loss but it's not the end of the world if it's a true emergency scenario. That's also a manageable risk that you can avoid with well diversified investments.

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.

I disagree with this. If you are semi-retired like me, you need to have enough cash on hand to weather a market downturn of 1-3 years. That way you are not selling stocks at fire sale prices to keep a roof over your head and food on the table.

Who said anything about the stock market? Short term CDs usually have a fixed rate, you don't ever sell them at a firesale price.

CD's are terrible investments at the moment. A 1 year CD doesn't offer a much better rate than a FDIC money market account, and I certainly would not invest in a longer term CD at the moment.

When interest rates tanked, I moved all of my CD's to money market accounts when the term was up.

What is key is to only open a money market account at an institution with a long term track record of staying above average on rates compared to thier competition. You want to avoid the institutions which constantly raise and (and then lower) thier rates. Bankrate.com is a good way to research these.

Although pretty much all essentially risk-free investments these days have interest rates so low, you're getting into fine-tuned optimization territory for most people. It's fair that if you have a big wad of cash that you really want to protect from capital losses, it's probably worth putting it in something other than cash. But the gains are minimal.

Get a $30K line of credit with your bank. Don't touch it unless there is an emergency.

Borrow when you need it, then you have some time to figure out what assets to sell to pay it back.

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

If the market declines significantly, and you're still a long-term bull (inherent to the buy and hold strategy), you probably don't want to sell until the asset recovers.

But is it worth missing out on the potential gains of 6 months' income doing nothing, just so that if you hit an emergency (by definition a rare thing) you don't sell during a down period?

I mean, keeping the money in savings virtually guarantees 'losses' in real terms.

shrug maybe, maybe not. I sometimes have rather low cash reserves; credit cards and a checking account that lets me overdraft for free (via margin borrowing) can give me a bit of liquidity. But credit cards come due every month, and margin borrowing can always result in a margin call, so it certainly does feel like a risk. Having a bit of cash around gives you some peace of mind, but what's that worth depends quite a lot on the individual.

I believe there's a significant risk of deflationary times ahead - the prime rate over the last five years really makes much of that argument for me. It is not a given that keeping the money in a savings account guarantees real losses.

The typical advice is ~6mo in liquid assets. Not cash.

Stock is considered a liquid asset.

If you meet the income requirements (>$116k if single, >$183k if filing jointly), you can contribute up to $5,500 per year into a Roth IRA which can also double as an emergency fund if need-be. You can withdraw all your contributions with zero penalty anytime for any reason. You just can't withdraw your earnings on those contributions without a penalty.

I can put $10K on my CC and not have to pay for 30 days which is plenty of time to cash out investments. I'd rather take the hit on selling low in an emergency then proactively give up gains by having cash sit idle for years.

You sell bonds or near cash equivalents like t bills, gilts , consols etc

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 significant portion of your assets in savings accounts. Primary reason is that by not being in assets that deliver returns, you are losing money to inflation, even at these low levels of inflation. (Also, you have to save a ton more if you don't let your money multiply.)

You are, as far as I know, entirely correct. I still think the survey was designed specifically to find these people who exist in this manner, and I think your criticisms are valid when placed against the thrust of the survey.

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%.

Other commenters weigh in with excellent counters. However, the OP (and I) didn't split between equities and cash.

It would have been very rare for one to have -- while trying to be prudent -- constructed a portfolio of assets across checking accounts, equities, bonds, and primary residence that saw anything like a 50% loss from peak to 2008-crisis trough.

Note that the checking account loss was 0%; bonds did not perform as badly as equities; and in the vast majority of the US, residential RE did not fall 50%. Also note that if one did not choose the absolute generational bottom to liquidate the entire portfolio, the actual losses would have been lesser still. In other words, allocating across a diverse set of assets would have protected from the worst of the downside (while letting you participate in the historic run in equities since).

Irrational fear of volatility is going to have a lot of people retiring much later than they would like, with less money than they would like.

Really bad advice. The stock did stupidly well after that.

When the market goes down, you can still hold. Or you can sell before the bottom. I was playing in the market in 2008, I got out after the down lost about 2000. Paid off all my debt, got back in at lower prices! Worked great.

I also have $1 in my savings account.

> "Fame and Fortune: Nouriel Roubini" Times Online, June 21, 2009

Nouriel Roubini lost 260% gains + dividends between 2009 and today. So... I wouldn't really count on this guy's advice at all.

>most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts.

This, of course, depends entirely on the individual and their circumstances.

Obviously, if you're planning on using 85% of your assets in the very near future, that's an exception.

But in general, if your financial advisor suggests going 95% cash for the long haul, you should probably get someone else.

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 the ability to borrow while transfers or sales settle. I fail to see how it's precarious.

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...

Because in diversified portfolio, to loose it all the following must happen. All listed companies must have completely collapsed. Goverment must have basically collpased to loose all value on the bonds.

If that happens its probably the financial amagedden anyway.

If the stock market falls by 50% i still have 70% of my portfolio. I'm OK with that.

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.

> 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.

> 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.

Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system. I doubt your bank savings account would be very useful in that scenario.

Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?"

> Moreover, I don't think this article is actually talking about people who do save but just choose to save into high-return assets. I save 80-90% of my income, but it all goes into index funds. Does that mean I am not "a saver?"

Not at all. This article is about people who aren't saving because they don't think its necessary or because they can't afford to.

An emergency fund IS NOT an investment. It is insurance; treat it as such.

> 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?

>>Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system.

Yet if you owned real estate[Land, Houses], they stand exactly as they are. While the numbers in the bank database turn to 0 after the collapse and companies go bankrupt and never recover. If you owned real estate, your money will recover in the very next turn.

Agreed, but that's kind of off topic.

Real estate is yet another asset class which should be included in a diversified investment strategy, but my point was that there's no evidence that money should be kept in a bank savings account.

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.

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

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.

Not even the worst stock crash in history was a 99% drop.

Also, you are almost 100% wrong about the intention of the article. It's not that they're trying to make some point about people's poor asset allocation, it's just sloppy reporting.

If their actual point was that people had too much money invested, wouldn't the most obvious and actionable advice for the "What to Do If Your Savings Fall Short" section be to sell some shares and transfer the cash into a savings account?

It's on you to prove why your financially unwise viewpoint is correct.

The attitude you're bringing to this conversation makes me entirely unwilling to continue. Sorry.

I really don't see a significant advantage to using a savings account with a bank. Keeping 50k in a checking account vs savings account costs you less than 5$ a month before taxes which is just not worth the effort of opening a second account for someone that's keeping 50k cash on hand.

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.

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.

I strongly disagree with you and believe FDIC insured accounts can be trusted beyond a market fall of just 80%.

Market fall of 80% in a portfolio that has been diversified isn't that bad. Say you 50% in shares. It has lost 80% of that 50%. That's not so bad. You still have a chunk of savings.

If goverment bonds loose all their value, it means goverments are close to failing.

If real estate is loosing all its value. It means people have no money to buy houses

If all 3 is going on the same time, some serious stuff is going and I'm not sure your goverment backed account is really that secure.

100k in stocks after a shock crazy crash of 70% can still be painfully liquidated for 30k.

Given the interest rate so low, saving is definitely a "smart" answer. Keep cash and keep invest seems to be a "wise" choice in our current market. So, it might be the market (or policy maker) to blame...

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 confusing to a lot of Americans.

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

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 your means, budget down and find ways to reduce your burn rate.

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.

I just encouraged my SO to move what she'd held in savings to start off her retirement. Now her savings account is just a small emergency buffer with automated minimum monthly transfers to prevent maintenance fees.

The only reason I still have a savings account is because I expect interest rates to go up again at some point in my lifetime, and, as petty as it is, I didn't want my credit score to take that temporary dip for closing 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" 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.

I resonate with your comment. Thank you. I value sleep over all things. My life and daily decision making revolves around "Will I lose sleep over this?"

I sleep sooooo well at night. Sometimes I wonder if the richest and most powerful people in history sleep this well? Hehe, having a couple years of travel in savings works wonders :-D

Sure, but there aren't many reasons not to keep that cash in a checking account. For a while I just kept all of my cash in a checking account because it actually paid a higher interest rate than my savings account from the same bank.

>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.

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.

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...

MMM has at least two rental properties and is a phoney.

He can teach his kid to be a rentier by borrowing long and taking advantage of the separation between the value of labour vs assets when fiat money is over-issued by private banks.

And how to run a web-site about being frugal whilst deriving rental income from three families who cannot save because they are busy working hard to keep MMM pumping out half-truths on the internet.

Can we all take up three times as many houses as we need and live off the rental income siphoned off from the labour of others? No.

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 into an illiquid, overvalued asset.

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 extraction by people who are adding zero value to society. That is the rentier - they generate no wealth merely appropriate it.

If you work at say Target 40 hours a week, squeak in the occasional overtime and work on every holiday you take home about 12-15k a year after taxes that's about half of what MMM gets from rent.

MMM hasn't come within ten grand of frugality in his life.

It doesn't strictly invalidate his message but it's a grain of salt that should not be forgotten.

I think you're being a bit unfair. I have no doubt he is pretty frugal. That said, I'm not a huge fan of his schtick but recognize that there are people who probably benefit from the over-the-top exhortations to avoid spending money. A lot of people fritter away a lot on things that they don't need and may not even especially enjoy. Which has been my main takeaway on those occasions when I've skimmed his site. Whatever works.

The frugal stuff is rubbish. He can be frugal because the main outgoing for any family is rent. He's taking in two rents. The rest is just a cheap show.

The reason why we are all suffering is because of rentiers. It's not because we have slightly expensive data plans on our phone. Rentiers are using this to explain away the real problem. This guy is along for the ride for the web-clicks.

Go on his site and ask a question that gives the info that he has two rental properties and see if he lets it through moderation. Be polite as you can. He won't. MMM knows where it's at.

If I may paraphrase:

"MMM can teach his kid how to make money on investments in real estate and make profits from renting his owned (financed) assets.

He can also teach his kid how to share what he's learned about not over-spending on depreciating assets."

Then there's something in there about people who choose to rent being taken advantage of by people who choose to be landlords, but I don't understand it well enough to take your meaning.

Don't paraphrase me, thanks.

Yet another excellent read from MMM.

How many rental properties does he have? Think he just survives on being frugal and dollar cost averaging? Think again.

I like the cut of your jib.

I've been considering buying rental properties to supplement my income, but something deep inside somewhere, based on living close to people well below my income level as one of a 4-unit building, prevented me from doing it.

When I tried to compute how much rent I would charge, I realized I would be profiting simply by taking money from them because they have been unable to accumulate capital at the pace I have been. While that does indicate some skill on my part - hey, I scrimp and shop wisely - I don't feel it morally qualifies me to skim from others. That would be paying myself twice. When I scrimp and shop wisely, I benefit from having extra savings, but using that savings to get more from others without adding more value is something I don't feel right doing.

I could morally accept money as a landlord based on my labor doing maintenance and time spent bookkeeping, I suppose. That - speaking as a current tenant - does have some value, but I just don't think it would be much, approximately that of a day laborer or accountant for several hours a week. So screw it, i'll make a lot more money creating something of real value.

Thank you for helping me recognize and articulate this, branchless.

I'm really confused... The thing of value you are providing as a landlord is housing. How is it skimming? Putting money towards a house/condo instead of investing it in business has an opportunity cost. You lose out on the profits from dividends/interest/cap gains. That has to be replaced. If you charge too much rent, other people will under-cut you. The price is set by available housing. Where is the deceit?

Do you feel you would owe people the freedom to use your property free-of-charge? What about the mortgage payments you endure? The maintenance/upkeep (roofs, siding, carpet, plumbing, electrical, all amortized over the life of the building)? Should this be a loss you take in order to let someone else sleep in your house?

Disclosure of bias: In Seattle where I live, the cost of real estate is higher than the prevailing rents, when you factor mortgage payments, maintenance, utilities, HOA, etc. This makes it a little easier for me to see the equity in pricing between rentals and owned homes. It may be different in your parts of the world.

Glad to help. Spread the word and don't accept the empty US rhetoric that "it's just business, baby".

Good for you for having some back-bone.

Deriving income by adding value is fine. The rentier just takes.

He publishes his family's spending every year: http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-fa...

That's not his income. I see his mortgage / rent is zero. So if we all had no mortgage/rent to pay MMM would see his income fall as he has rental properties.

I'm sure many families renting would love to "build stuff out of wood" but most have to have both parents working to pay the rent and bills. If only they had no mortgage. Still it's tough what with all the speculators in the market feeding off basic human needs so back to work for them.

right 25 grand--no house or car payment because he was in the right jobs at the right time and could afford to buy most families' largest expenses outright (over 50% of income between the two)--and he still managed to spend the entire pre-tax income of about 30% of american households.

> 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.

Thanks -- I'm stealing this great idea.

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.

It's probably worth pointing out to him that there are other benefits such as not having to worry about losing the money or having it stolen from you. I agree with your assertion though, it wasn't that long ago that my savings account was netting me $7/day and thus covering all my commuting expenses for the month.

But what was your real interest rate when they were paying 3-7% in interest?

Back in the 1970's savings accounts were paying 15%+. However, inflation was double digits as well. You'd be lucky if your real interest rate was more than a few percent.

That's not what I'm talking about. I was yielding 5% interest on an ING Direct account in 2006 -- not exactly a crazy time for inflation.

If you look at historical retail interest rates, 3-5% rates were typical in ordinary times.

I don't disagree, real interest rates are weird right now.

Just trying to call out that it's the real interest rate that matters, not the nominal rate.

This. Now real interest rates are negative as inflation stats don't reflect reality. So 0.5% when prices are rising well above this.

Almost nobody on hear is speaking of "real" rates. Disturbing.

I agree. Just because the price of eggs and computers aren't going up doesn't mean inflation is flat. The Fed's printing machine has massively (re)inflated almost all major assets including housing, education, and non-disposables.

BTW, this is not the first time I've seen a comment mentioning this fact being downvoted. I would be more than happy to debate this with anyone who disagrees.

The price of eggs has been going up.

Even so, under ZIRP it's really weird how little passbook savings returns these days.

I remember earning quite a few dollars with < 1K in a savings account when I was a kid. Was awesome to watch it grow. Now I just keep my cash in a checking account. When Chase or TD sends me a "deposit 10k get $500" I consider it.

Cash is good, but I get a better interest rate in my checking account.

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.

If there was one takeaway I was surpised by from "The Millionaire Next Door" it was, to paraphrase, high income professions like Law and Medicine tend to spend at very high rates, frequently invest poorly, and rarely accumulate a significant amount of wealth as a ratio to their income. The greatest wealth building households were two income, upper-middle class, with good, conservative savings habits. At the time of publication I think it was more valid than today, re: the change in distribution of wealth in the US over time.

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.

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.

> The truth is you're losing more money by not having any of it generating higher potential yields.

I'm aware of this and can account for this loss. What I dislike is an unknown potential loss that I can't readily account for.

For example - if I invest $50k I need to account for the possibility I might lose the entire $50k, or a portion of it. Being realistic, I'm unlikely to lose it all, but even if I only lose $5,000 that puts me off from making that investment. It's very risk-averse behavior, which many people with a confirmation bias are against. Their $50k investment may have returned $150k and they begin to question why I wouldn't make that investment.

In other words, even if 3/5 people make $150k, as a risk-averse person, I see myself as already being part of the 2/5 people that lose the $5,000.

The only forms of investments I've ever done are playing the markets on MMORPG's. The markets are predictable, safe, and I can readily make a 8-10% ROI each night. If I could make investments like that in a real market I would in a heartbeat! :P

Check out Harry Browne's Permanent Portfolio:

https://en.wikipedia.org/wiki/Fail-Safe_Investing

It's a relatively low risk way to invest.

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".

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.

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.

Compare your savings interest rate to the rate of inflation.

You're literally better off with credit card rewards and paying down the debt monthly, in many cases. That's how bad most savings accounts are.

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. 2035 fund) that starts off aggressive, then gets more conservative when you get closer to that year. So it is mostly foolproof for the average person (although not the best possible returns for them).

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.

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".

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.

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.

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.

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.

A big chunk of people just don't have any money held in reserve:

https://news.ycombinator.com/item?id=10354263

Well, that's depressing.

Almost hard to believe, to be completely honest -- but I might just be around the right group of people?

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.

> 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.

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.

> 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

2 - http://www.tradingeconomics.com/united-states/personal-savin...

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=na...

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

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%.

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.

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.

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

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.

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.

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.

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.

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".

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.

I wonder what would happen if savings accounts was ditched completely at least from for-profit banks.

A lot of people here think this is about you parse "savings". It's not:

47% of Americans say they lack the cash to pay a surprise $400 bill

http://www.politifact.com/punditfact/statements/2015/jun/09/...

I think the audience on this site is mainly out of touch. When you're making a fine salary it's easy to forget that most people don't. When you're spending your time looking up at those above you and positioning to get to their level (because upward mobility is an option) it's easy to forget to look at the piles of people below you where it isn't

It's easy to assume throwing $100 around here or there is normal when you're able to throw $800 on an impulse iPhone without a problem. Many people can't.

I'm probably just as guilty too.

>I think the audience on this site is mainly out of touch

Yep!!

I grew up in an entirely different mindset than the upper middle class office workers I work with. I often feel like that I can't fit in or relate to them in many ways because they seem very out of touch with the world outside of their own upper middle class existence. Even in college they never worried about bills or living expenses, their parents paid.

It wasn't that long ago (less than a decade) that spending $600 on a car repair was absolutely unbearable for me. I went through that stress and now it almost seems surreal that sort of money was such a stress in my life when I look back on it.

I will never, ever, lose touch with the sort of lifestyle that my income can provide me (though I prefer to blow $800 on a weekend trip instead of an iPhone...)

The most interesting thing is that having so much extra money provides so much more opportunity to earn even more money. The old "You gotta have money to make money" really is true. I do money making activities outside my day job that I would never be able to do if I didn't have several thousands of dollar on hand to float for a month or so. If you are talking about real estate you need tens of thousands of dollars. The more money you have the easier it is to obtain more.

>>Many people can't.

Any what are they doing about it?

Please don't just stop at that. World today is at a point, where any skill can be gained at a very little price, which is almost free. You can learn anything you want, provided you 'want' to learn.

If you stretch a little, sleep a little and push harder you can learn how to repair stuff, build websites and what not.

I think most people can bail themselves out of poverty in first/developing world countries, if they learn simple management skills. Planning, setting goals, reviewing, taking next logical steps etc.

That is a much better line of questioning since it avoids the arguments about what is meant by savings. Also clicking through I found it avoids the followup argument of "what about credit cards"? To quote the whole thing: "47: The percentage of Americans who can’t pay for an unexpected $400 expense through savings or credit cards, without selling something or borrowing money, according to the Federal Reserve."

But there's still a problem in that the $400 is "pay immediately". The other study from the same article showed 50% of Americans could cope with a surprise $2000 bill that they had 30 days to pay, in 2009.

Because they could use their paycheck and hit a payday loan store and begin to fall behind on other things.

If you're living paycheck to paycheck a bit of time will let you figure it out but you don't have the cash today to pay a small bill.

You shouldn't assume most people have much in the name of savings, much less capital.

It's revealing how spectacularly everyone here is missing the point. To anyone born into and raised amongst the working class this result is obvious. Most people don't have any savings. If that isn't obvious to you, then you're not spending a lot of time with most people.

Part of the reason I love this site so much is that, while the demographic is highly intelligent, they so often miss the forest through the trees when it comes to these kind of articles.

People aren't eschewing savings accounts because rates are low. They don't have money in savings accounts because they literally don't have ANY money to put in one.

It reminds me of a story about someone who misunderstood the point when she heard people were begging for bread.

"Qu'ils mangent de la brioche."

This study was SPECIFICALLY about savings; and that's why it's a deliberately misleading thing.

So called "cash buffer" problems are actually a separate problem for many people. For many americans, maintaining a cash buffer is an inappropriate strategy because of their revolving credit balances.

This should be more explicit in saying "Savings Account" and not just savings.

I have plenty of savings yet have 0 savings accounts (since they're practically useless). A little misleading here when many people just keep their money in checking or investment/retirement accounts.

My Internet bank doesn't even offer savings accounts -- all accounts are checking.

Plus, there's not a lot of difference between the interest rates of savings and checking accounts these days in general, so there's not a lot of difference between the two.

But, surely anyone with over, say, $10,000 in total savings/investments has at least $1,000 (10%) of it in some kind of cash account. Why on earth would one keep all of their assets in accounts that could lose value?

The point is that checking account != savings account.

Sorry, I meant "cash savings" account.

Why?

I have over $100,000 in invested assets, spread across a diversified pool of ETFs. The only cash I have on hand is en route to my brokerage.

Well, I think it's relevant to consider that any type of investment vehicle outside of an insured savings account is subject to risk. Of course there are varying risk profiles, but in cold, hard terms an insured savings account (FDIC) is, conceptually, a secure store of funds. No downside risk and access without penalty to 100% of funds is something I don't think many investment vehicles can claim.

Checking accounts are also insured by the FDIC, and most people wouldn't include their checking balance when asked about a "savings account"

I probably would, because I'm not sure I see the distinction.

I'd also answer "none of your business" if asked.

In the US there is a legal distinction between savings accounts and checking accounts, which governs how many "convenient" transfers can be made to/from savings accounts, among other things. The question is specifically asking whether people have money in the legal "savings account" category, not whether they have savings in any random bank account.

Checking accounts and certain retirement accounts are also insured, and easily retrievable

The issue seems to be the relative lack of use from a separate savings account.

This is what I was wondering. I assume they mean liquid savings. I rarely have any liquid savings but I have 40k in various retirement funds.

And people wonder why they say Tech is out of touch. Reading the comments here is a great demonstration.

Examples:

> who uses savings accounts anymore?

> Cash on hand or it's invested in stocks, bonds and my home.

> The truth is you're losing more money by not having any of it generating higher potential yields.

> the total net worth of my wife and me is many orders of magnitude greater than what our savings account reflects

These kind of statements just show that the audience here is woefully out of touch with the average person.

The average person in the US is unable to absorb a $1000 emergency. The average person in the US avoids going to the doctor because they can't afford it. The average person in the US doesn't have enough money to justify an investment account of any kind.

But we in tech are privileged and goddamnit if we're not mostly (as a group) utterly blind to it... or worse - in denial that we are (and aggressively defensive about it).

The median household income in the US is $51,939 the median individual income in the US is $28,567. Note: median, not mean. That is the financial reality of the average american.

In tech we're used to making 6 figures and then bitching that other people aren't trying hard enough. We quibble over what "in savings" means. We try our hardest to minimize problems that we ourselves don't experience rather than work on the very real, very clear, issues at hand. This feels like we have a maturity and empathy problem as an industry to me...

Thank you, the comments look like something from the Onion. "Oh, I don't have any savings either, it's all tied up in my money market account, stock portfolio, house, car, and business."

When someone reads "less than $1000 in savings" and interprets it as "they must mean less than $1000 in a single investment vehicle" there's a huge empathy gap.

Seriously, the headlines write themselves:

"Young Tech Entrepreneur Says People in Poverty Just Need To Have More Money."

Hi. I agree most people here are out of touch. While I am no longer in such a desperate situation, I was once in a few of them. I resolved to, and ultimate worked for and sold a financial product to help people with many of the problems they now face (sort of not making enough money or being in a debt spiral, but give me a few years to amass capital and I can try that too). I assure you, I have excellent data we use to help understand what features our customers need and which features customers do not need.

I share your frustration, but would like to provide some alternative narrative around this story for the benefit of the audience here.

Consumers avoid savings accounts across the board of income. They do this because financial advisors, both public on TV and private, tell them to. Many lack liquidity at the scale of 4 figures, but even those that have that avoid them. They do this for a lot of reasons, but it's incorrect to imply that the only reason they do so is because they don't have a cash buffer.

In fact, our data suggests a surprising number of people keep a cash buffer when they'd be much better served paying down credit card debt with that money (and of course, better still served by converting a large revolving debt to a more attractive fixed loan). Again, many reasons (e.g., protection from credit-related cash seizure) exist to justify this approach at all income levels.

Stories like this exist to belittle younger generations and further the narrative that our nations financial decline is somehow tied to the imprudence of its younger and more vulnerable citizens. This could not be further from the case; the real story is one of outrageous wealth extraction from the young to the old without a hint of remorse or self-reflection. That story spans many financial domains and also places like property tax law and policies around public health care.

Stories like this also exist to push the burden of innovation off of banks, who say, "No one uses these savings products so we should focus on spending products." The point, "Your savings tools are terrible" is seldom offered. Stories like this are solicited carefully, by highly paid people, to help avoid painful discussions like, "Should the savings account rate be locked to at least the rate of inflation?" that many people (including people at the CFPB) have raised.

Just sayin', this article is not only a pile of garbage, but it's a meticulously crafted pile of garbage designed to tell a toxic narrative.

...the real story is one of outrageous wealth extraction from the young to the old without a hint of remorse or self-reflection.

Bingo. More than half of your taxes are directly transferred to retirees. Those debt payments on your school loans are paid back to investors, many of whom are large pension funds and insurance / annuity accounts. The Fed has refused to allow a housing market correction, which is an implicit transfer from young to old. And the main point of Obamacare was to force young people to purchase insurance in order to subsidize the older generation.

But if younger people would just stop going to Starbucks and buying IPhones, they wouldn't have any financial problems.

Thank you. This is the only interesting comment in this thread.

This doesn't parse. You just said the median household income is $51,939. That's a ton of money. I and many spend far less than that. http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-fa...

Even throwing on a mortgage payment a couple can easily afford this - and this is a lot of luxury.

Aggressive MMM savings strategies aside, $52k isn't a ton of money... Your profile says you are in Kansas City, so lets run some numbers really quick...

$52k means take-home (after tax) is about $38.5k.

This site [1] says monthly rent is about $1.4k plus $150 in utilities. One car payment on modest transportation will be about $200/month and insurance and gas might cost $200 more.

We're up to about $2k/month in expenses for what is a relatively normal cost structure. That monthly take-home on $38.5k annually? $3.2k.

We're down to $1.2k remaining cash each month and haven't considered heathcare, food, student loans, retirement, savings. And there aren't any kids in this equation yet, which causes another pile of problems if we assume the 1.8/family rate from the CIA Factbook.

These are just ball-park, but then, so is that household income. It is very easy to eat up income without living an extravagant lifestyle full of smartphones, laptops, and luxury vehicles.

[1] https://www.expatistan.com/cost-of-living/kansas-city

$1.4k is way too much for somewhere that you're still driving to work from. I think a lot of people overestimate the value of a big house. You just end up filling it with junk.

If you get a smaller house - say $1k/month - suddenly you can afford to live very comfortably, and save some as well. $52k is absolutely a lot of money; of course there's always more things to spend it on, and I won't pretend more money isn't very nice, but $52k really should be plenty. Putting it another way: if $52k isn't enough to make you happy, $100k probably won't be either.

I appreciate the critique - I'm not from the KC area, so I don't have local intuition. Seattle rents in the city are about $1.2k to $1.6k for a single-bedroom apartment, and a 2-bedroom (as would befit a couple or small family) are north of $2k, so I don't have local context.

Can I ask what you mean by "really should be plenty"? I left out costs which, in my part of the country, would vastly exceed the remaining $1.2k in our little exercise. I guess I should have been explicit about this assumption. I am better off than the average American by far, but even so, student loans from my grad school (an extravagance, I know) hurt to the tune of $1k/month. I don't have kids, but feeding/clothing/sheltering them would take a pretty penny too, nevermind the costs to time, commute, etc.

Any one of the un-accounted-for expenses could vary wildly person to person, and could easily swallow up all that excess. I'm all for frugality and feel like folks have a lot to learn in that regard. Still, $52k for a household doesn't seem to math out without a whole lot of scrimping and luck.

I'm not from KC either, so I may be off base there. I do live somewhere with a higher average salary than nationally though.

Certainly there are places (SF in particular) where you're in a pretty bad place if you're making the national median, but I think anyone making the local median in those places is doing all right. The median is by definition not going to be a good place for keeping up worth the joneses. But if you opt out of the competitive things and just spend on what you need, I really think $52k is a pretty good place to be, and if you're struggling at that level (and aren't tied to a job in an expensive city) you should seriously look at downsizing your house/car/whatever your biggest expense is, because I have to wonder where all that money's going.

Of course plenty of people really are struggling - half of the country is on less than $52k after all. Below about $40k I'd definitely say "it's not you, it's your income" or something on those lines.

You're in Missouri so that might feel like it's a lot of money because you're living in a place with a significantly lower cost of living (10% lower than the rest of the country) but also a lower median income ($45,321 last year).

So for you that median income would be a 14% increase over what you expect - in an area where your buying power is also higher than the rest of the country on average...

So I understand the dissonance.

> We try our hardest to minimize problems that we ourselves don't experience rather than work on the very real, very clear, issues at hand. >This feels like we have a maturity and empathy problem as an industry to me...

Fully agree.

Without really disagreeing with a number of things you say, it's also fair to say that we have an entire article based around a question the answer to which is essentially meaningless (given how low interest rates on checking accounts are). I expect that, for a broader population, a better question would be around the size of their "emergency fund."

> I expect that, for a broader population, a better question would be around the size of their "emergency fund."

Which other studies have revealed is "basically $0". This question is highly correlated with what you are referring to for the average American. You're just in a bubble so you don't see the relation because it's not related for you.

That's ok, but what I'm pointing out is that it's not "essentially meaningless" and dismissing it as such is actually being out-of-touch.

I think you're probably right that you could ask this question in a number of different ways and come up with at least highly correlated results. I'm not arguing with you. However, as someone involved in surveys among other things as part of my work, I do think precision matters. Otherwise, interpreting the results lead to exactly the sort of arguments you're seeing on this thread.

That's fair in general but this kind of stuff ALWAYS comes up on this topic on HN. It's derailing behavior.

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 peoples "minimum standard of living". I've seen people who, for probably very cathartic reasons, will make very poor spending choices on food, electronics, gas guzzling cars and other things instead of plan for items that move their lives forward.

And the sad part is that everyones minimum standard of living SHOULD be going up, we all SHOULD be living better then our previous generation. But the actions of many in the governance tier of our society have chosen otherwise for us.

Your perspective is one that I share, on the nature of class-based economics in a 'consumer' society such as the modern United States. I'm going to copy/paste a summary that I sent to a former co-worker (CFA Level 3, >$6B AUM) for his thoughts and he felt I did an okay job (made me feel smart).

So demographically, older workers have not saved enough for retirement. That drives them to maintain employment. With a lack of job opportunities (the slack), the youngest generations are presented a significant challenge – with amongst the highest debt levels and least job prospects, the youth cohort entering its first (or prime) earning years can be paired with another observed phenomenon, that of the wealth disparity. As a premise, poor people and young people spend aggressively, wealthy households invest and don’t spend proportionally to their means, and a significant number of older Americans have no retirement savings to speak of, and therefore cannot spend proportional to offset their declining economic contribution. Essentially, this is a perfect recipe to grind an economy to a halt: Wealthy people don’t spend, elderly workers don’t spend, poor people and young people love to spend but can’t without reasonable access to funding.

That covers pretty succinctly a big chunk of a very complex problem. Thanks for that.

Honestly with him as my audience I have to tone down any cause-effect blame / hostilities that I genuinely harbor, because those are different subjects (though I did infer the fact that only workers over 55 in the US have gained in employment since 2008). Just describing the problem in terms people can understand seemed a worthwhile experiment. As context, he's an Asset Manager and Financial Advisor for the public sector, so there's nobody more disappointed in the lack of quality rate bearing gilt-edged securities than him, figuratively speaking.

>, 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 proposition

You can buy Vangard market index ETFs. VOO is their S&P500 ETF and BND is their bond ETF. Maintaining a 60/40 split of VOO/BND is hard to beat over long time frames. Substitute VYM for VOO for more cash flow at the expense of higher volatility.

$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.

https://www.betterment.com/ has a much lower minimum, but your point stands.

The average standard of living is going up. Things get better all the time. Many people in debt have nicer cars than people did 20 years ago.

The sad thing is people choose to buy new cars rather than the perfectly functioning old ones and higher quality food. Or people without large families choose bigger houses rather than perfectly acceptable ones that two generations ago couples with 7 kids would fit in.

A very good standard of living in America can be had for well under $20k a year in family spending given smart decisions. The problem is people don't make those smart decisions. Maybe the government needs to step in - or maybe those people prefer their decisions to the ones other people think they should decide.

I chose healthcare and an eight year old car and $100+ in savings a month whereas my similar earning coworker chose a new car payment.

Also people spend lots and lots of money on alcohol I notice - and the % of that spending doesn't change much with income - they just buy higher priced drinks.

> Or people without large families choose bigger houses rather than perfectly acceptable ones that two generations ago couples with 7 kids would fit in.

I think about this myself. I have a house that's probably three times the size I need. But I bought it because it got me into a nicer neighborhood. All of the affordable, two-bedroom houses are always in really seedy neighborhoods where cars are always broken into, the cops are always being called out to, etc.

That's another great point, the more expensive house might not be because of size, but because of the strengthening bind between where you live and what that means for your chances at upward mobility.

My gut feeling is that the population of commenters here may exhibit some selection bias. As in, leveling criticism that the article doesn't include "investment vehicles" is a negative may be a valid point in some circles, but as a profile of the general population in the US, is a valid approach. With housing having gone through a giant bubble cycle and rents approaching all-time highs IIRC, there really isn't any extraneous income to invest (well, save) with a large portion of the population. I'll refer to the following chart as relevant to supporting my perspective:

http://www.zerohedge.com/sites/default/files/images/user5/im...

How does not including other vehicles help give an accurate picture of "savings"?

The vast majority of the population is not saying "I have nothing in savings" because all their money is tied up in yachts and Manhattan real estate; it's because they have no money.

Thank you for that take on it. As a 30 something, I've been "coached" over time that savings is for liquidity in the case of an unexpected event - loss of job for X months (cover bills with savings), medical emergency (cover bills with savings), or potential family development (need to purchase vehice for teenager). These events are not supposed to be covered by "dipping" into retirement funds, e.g. IRA or 401k.

The ideal method of financial planning I was taught is to invest for retirement through financial products which minimize risk and are not liquid assets, while concurrently saving in a "traditional" account.

Then why not ask a more accurate (less biased) question...?

E.g. david927's comment: "47% of Americans say they lack the cash to pay a surprise $400 bill" (https://news.ycombinator.com/item?id=10354263)

But... how do we know by leaving out the retirement/investment accounts?

Or it's because it's in investment or retirement accounts.

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 don't do any of these things!

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.

At least in the U.S., putting that cash into savings would make it visible, putting their government benefits at risk. They probably don't make enough to survive -- those TV's and smartphones might only add up to a month or two of rent alone -- so they're trapped.

You can bet your ass that the line of thinking is "They will support us"

I've known three women in the past year who receive benefits and do work under the table for cash. One told me a story about how bad it was when she started making more money and lost the benefits and how it "wasn't worth it." Another has two kids, is unmarried to get more benefits, and even though she job training said that she is never going to get a job that pays a lot because she wants to remain on food stamps. The other has an unreported side business that brings in about $1500 cash that she doesn't report.

Might be worth it for you to have a small place so there is literally "no room" for your partner's family...

Think about it. If you've got nothing and few prospects to ever have anything then why even care?

You might as well get some bit of happiness from something since everything else is awful. People want to feel good.

Were you poor or just broke while you were young? Poverty is far different from being in college and not making much. Poverty is much different than being short on cash. Poverty includes having limited options ahead of you and the prospect of always being poor.

I had the prospect ahead of me of always being poor. I decided to forego some immediate pleasures like having cable TV, expensive Internet, eating out, seeing lots of movies, new clothes/shoes, name-brand products, etc. so I could save up, go to school, and get my life in order.

What you mention may well be their line of thinking. Nothing wrong with people thinking whatever they want. I simply did not want the kind of future that such a lifestyle would bring me (i.e., remaining poor).

Now think about the time you were poor and the time you had money, and try to see whether you are where you are today because you were saving money.

Saving money, and leaving cheaply when poor will help you develop a habit for when you are financially in a better place.

However saving 20% of your salary when you make, say $2,000 per month in NYC/SF/LA, is not going to be possible. Not only that, but it would take 4 - 5 years to get to $20,000.

My thinking is there is a minimum people need to make before they can save meaningfully. Below that point, saving is just an exercise to get ready for a better financial position/earning.

There is a lot here about the interpretation of "savings account" and I agree that it is problematic. I have 10x as much in investment/checking as savings. However I don't think that fixing the semantic issues would change the overall issue: the distribution of wealth is even more skewed than the distribution of income. Most of this country would be utterly ruined if they got into a car crash and owed $10k to medical/repairs. And then there are people like most of HN (and me) who get paid ~$100k and save 20-60% of it and are not worried about that situation at all. It's not because we are better people or really that we deserve anything, we just have the right skills/opportunities at the right time. We are the few.

I was born into the wealthiest gender of the wealthiest race in the wealthiest nation and I happen to find working in one of the wealthiest industries to be not only easy but enjoyable. I have won the lottery. I have no idea what it would feel like to be at the other end of the spectrum, I just hope I don't forget how lucky I have been.

I applaud you trying to maintain perspective because a lot of people lack it.

Theres a big difference between "savings" and "cash in a savings account."

Given the current interest rate situation theres essentially no difference between money in a checking account and money in a savings account, other than that the checking account likely has a debit card of some sort directly linked to it. Both are likely earning near 0% or so close to 0% it makes no difference. Not that long ago CDs were paying >5% so it made sense to put cash into such instruments. Right now a CD is essentially pointless.

I would agree, though, that too many people have far too little cash on hand (regardless of where its stored). I often see people that live in a million dollar home but don't have enough cash in their bank account to pay the cable bill. These so called "asset rich cash poor" people are playing with fire since it's often that they banked too much on the appreciation of those assets to justify the situation they've put themselves in.

People should maintain a healthy chunk of readily accessible liquid assets which could include non-retirement non-speculative investments and some good old hard cash too.

The whole economy in America has no margin of safety and is a house of cards just waiting to fall down.

The average employee lives paycheck-to-paycheck.

The small business owner is constantly worrying about making payroll, and is constantly on credit hold with his suppliers.

The large corporations are holding profits offshore and are draining away the opportunities by offshoring.

The banks and Private Equity are conjuring up ways to rip the small business owner and common folk off.

It is worth noting that these statistics never take into account people's retirement funds. The survey also does not ask how much people have saved, but rather how much they have in their Savings Account. Many people keep all of their money in a checking account. Hence 1 in 5 people saying they don't even have a savings account. This is a rather misleading statistic overall. But yes, most Americans do not save. They have absolutely no education when it comes to personal finance, and feel absolutely no responsibility to educate themselves. They honestly think they can figure out their budgets on their own. This is shown by a lot of other similar statistics as well as many books on personal finance. The reality is we live in a debt culture. Most people do not understand why savings is necessary not optional. When shit happens, they just think, "There's no way I could have prepared for that." But the reality is that shit always happens. That's the whole purpose of saving.

Here's some interesting info on retirement accounts for those 50-64.

http://www.economicpolicyresearch.org/guaranteeing-retiremen...

In short, very few Americans will be retiring at all, much less comfortably.

"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.

Not taken as criticism, and I absolutely know where you're coming from; solid advice. My mitigation is tight stops, and yes, I know what the downsides of those can be in a crashing market. The risk/reward for me versus a savings account at 0.5% is acceptable to me.

Or if you mean it's all tied up in a 401K, yeah, I hear ya. The vast majority of our funds are in there. The mitigation to that is a goodly amount of cash (easily get by for a year with no income) in a standard brokerage account that has a debit card and a checkbook I've got lying around the house somewhere, under the assumption that something like AAPL should be liquid enough should we need the cash. But, see above...

Very cool! Also, a nice elaboration without getting too granular. I'm hoping none of these scenarios come to pass...but they aren't called "rainy day funds" because of sunny outlooks.

To me savings is liquid cash that you have on hand. It is an emergency buffer account. Every month (or whenever I get paid) since I have been employed or my wife has I have had money taken out of our checking account and put into another account. It doesn't really matter that its savings or checking account but that I can get immediate access to the account.

When the account has gotten too big we just apply some of the money elsewhere (which is not really hard).

I understand how the truly impoverished unable to save but I'm sort of disturbed to read so many here post that they think their 401K/Roth IRA is an emergency cash account.

I actually once tried to sell stock to get liquid cash. Perhaps it was just Scottrade sucking but it took a significant amount of time... so much so that I had to use my emergency buffer (savings account). Its been awhile since I have tried so maybe things have changed.

How long is a "significant amount of time"? If it's anything less than a month a credit card could cover that with 0 interest right?

There is a surprising amount of things that don't take credit cards particularly emergency house repair. There was another time when I had to put a down payment right away or else some one else would buy it. I suppose that is not that much of an emergency but I still think it's good to have a reserve with auto deposit.

Every extra cent I've had for the past 5-6 years has gone towards paying off medical bills from a hospital visit that exceeded my insurance policy's maximum by about $138k... I now have under $8k left to pay (everyone that would take sane payment arrangements or reductions has been paid off at this point). It's been very tough, I emptied my retirement accounts and have handed over tax returns etc. to pay it all off...

After this coming year, my plan is to start putting 20% of post-tax income into a Roth IRA.

Stories like this make me very happy not to be an ill person in the USA...

Since this discussion turned into a conversation over semantics and investing, I'm curious to see if there are any trends in HN readership. I expect some people won't feel comfortable commenting about this so I created a poll:

What is your NET worth?

https://news.ycombinator.com/item?id=10355745

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.

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.

f 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.

This is not an option for a lot of people, particularly those with families.

That said, your follow-up makes sense, and I've typically done something similar.

Don't count on the fact that a bartending job will always be easy to come by just because it once was.

Back in 2008 any job (even fast food) was hard to come by in my area.

The savings account (liquid emergency cash account) is sort of like life insurance. It depends on how risk averse you are and lifestyle. For example if you are older and have a family (ie kids) and a more expensive lifestyle you might want to have more cash on hand. This is similar to life insurance where if your young and have no kids there is really little reason to get it. There are many times in my life I have had less $1000.00.

Regardless less than $1000.00 on hand for emergency for the majority is disturbing.

Some manage to live frugally, and retire within 5 years: http://earlyretirementextreme.com/how-i-became-financially-i...

My personal savings-rate is around 80% (I spend about 1.2k CHF and make around 6.5k CHF) - I probably can also retire in five years or I will keep on working 20%-40, when I have kids.

I live in Zurich, read my story here: "Eight reasons why I moved to Switzerland (to work in IT)" https://medium.com/@iwaninzurich/eight-reasons-why-i-moved-t...)

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.

So what do we do about this? Should we have a society where people are working full-time and living paycheck-to-paycheck? Is that a fair and equitable thing?

After we fix our government corruption in this country, we should look towards more socialism - I'd rather live in a society that houses homeless children, cares for its disabled, helps its sick, and empowers its poor, then one that doesn't - and I think most people share my view.

Yeah, I share that view--where we differ is you're saying "socialism is these things, and capitalism isn't," and I disagree.

Does it really matter what it's called?

No, it matters how it's accomplished. Socialism and capitalism differ in that regard.

correct! capitalism doesn't help those without capital.

My savings account is pointless. The interest rate is about 0.01%. The question should probably be restated to get a more accurate response in how much of their own money people actually have access to in emergencies.

I have over 10k in checking, more in 401k/IRA and 0 in savings. The last time I had 1k in savings they gave me 1 cent in interest.

I dont keep any money in my Savings account. The interest rate is rubbish. I just invest it someplace better.

It's not just the ability to save, the return on savings, but also the ability to draw on credit that discourages savings.

The permissive rules that allow credit cards to bypass state regulations make it easier for them to encourage this kind of precarious situation.

The US financial industry has been consistently reducing the value of consumer savings accounts. Their interest is poor, their rules are arcane, they're awkward to work with, and they're often oversold as a feature to consumers who neither need nor want them.

In many institutions, interest bearing checking accounts with sufficient minimum balances deliver HIGHER returns than savings accounts for the same balances. In most cases, the march of inflation means your savings account is a pretty depressing way to LOSE money over time.

The savings account is a legacy product from an entirely different era in the American banking system. For the most part, consumers realize this and avoid them.

The articles says that "The responses are representative of the U.S. internet population, with a margin of error within 1.70 percent." They don't give us any information I could use to refute that assertion. So with that, we can assume that the people who reported <$1000 savings were not people with diversified portfolios or people who voluntarily eschew savings accounts because the interest rate is not profitable for them. It's astounding what a bubble this communitiy lives in that it could forget that most of the country doesn't have a bunch of money lying to around to invest.

When you have 0 interest rate people will park/invest their money _anywhere_ but saving account.

checking accounts, investing, real estates etc, check all of those big-data then you can get the real picture.

Interesting article, but I wonder why they did not use red=>green for "No Savings"=>More than 10k. It seems like an easier way to visualize the information.

Flawed survey, it asks “How much money do you have saved in your savings account?" Which isn't the same as "how much savings do you have?"

As others are pointing out it is a totally meaningless survey. They asked, "How much money do you have saved in your savings account?".

Many people will only keep a small emergency fund in cash plus some money in a checking account and have everything else invested. Do those investment accounts and retirement accounts qualify as "savings accounts"? Probably not if people are reading the question literally.

Those accounts that you mention are not liquid - if something happens and you need money tomorrow yo don't have immediate access to those funds. Also, sot retirement accounts levy fees if you pull funds out before you are 60.

It actually surprises me how many people keep >$10,000 of cash in their savings account. That would make sense to me if you have a large expense coming up like a house or a car, but if it were me then most of that money would just be sitting there and I'd rather have it somewhere that it's making more money for me.

Metacomment: Great example of how to turn a cheap Google Consumer Survey into a blog post that gets a bunch of traction.

I don't have a savings account, but I do have more than that to spare and spend on whatever I want or not...

Individuals have a variety of options for where to invest excess cash. On a slightly different subject, does anybody have any advice what a small business should do with cash? Are there practical or relatively safe ways to get a return on a corp's cash on hand beyond basic interest?

What do people use to save? I use Qapital, I know a lot of people like Digit. I know they can't foundationally help the problem but they can help a lot of people who are capable of saving but aren't - which I would suspect is probably close to the majority of these folks.

It's interesting to see this juxtaposed with the story about extreme poverty dropping globally:

https://news.ycombinator.com/item?id=10352189

Does anyone know the survey sample size or where/how this survey was conducted?

Title says "savings", article is about savings accounts. Also, the definition of millennials, is quite eye popping

Keep in mind median household income is below 60k. This isn't surprising. I wonder what the statistics for our social economic level are.

"our"?

I bet most people on here make more than 50k a year.

As others have pointed out, the article is stupid because it asks a misleading question.

So, instead of discussing that, I'd like to ask: roughly what savings do HN readers have?

How much should I be saving at the minute? What should I be saving it in?

I'm a PhD student in my early 20s, living in London, and I only have about ~£500 in savings. I'm trying to save £1000-£2000 per year. At the minute, I just keep my savings in a separate current account to my main account -- which also has higher interest (3%).

I wonder how many of those people are paying off mortgage with what would be their savings.

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.

Medium-term I guess. I've got 2 years left on the fix, then it floats.

Everyone says rates have to rise eventually. But so far we've gone 7 years of near-zero rates. If there were a dramatic shift I could take a payment holiday and put it all into savings, but I doubt I would. As for inflation, it affects any form of saving equally - nominal 4% interest is better than nominal 3% whatever that is in real terms.

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.

After tax. Adjusted for risk.

There's also the liquidity angle (which might be mitigated on the pay the mortgage early side with a LOC).

Too bad that a far more interesting discussion about Libertarian communism got flagged (or at least is not visible on a main page). https://news.ycombinator.com/item?id=10351830

This is a silly article, who uses savings accounts anymore?

Lots of people. My ally savings account is 1%, about the same as a CD.. so I keep 2 months of expenses in it.

I wonder what the numbers are like for Canadians

So 38% of Americans are have more than $1000 sitting around becoming less valuable everyday? That may be a more interesting conversation to have.

You can put me in that group, though I don't know why you have to declare me a sucker--you don't even know my motivations.

Surely you can have the conversation without tossing around insults.

Another way to look at it is the following. Many Americans (but fewer than 38% I'm sure--to be fair) have more than $1000 sitting around earning minimal or no interest--but also fully liquid at zero to minimal risk of capital loss--as part of a diversified portfolio strategy.

Only 38% of Americans are capable of being self-reliant in the event they miss a paycheck or two.

edit: Why the downvotes? Is there a problem with being moderately self-reliant?

Savings accounts aren't the only way to achieve that.

Good! Savings account is the worst place to keep money. Mine are in my 401k, investments, tied up in my home, or just sitting in checking ready to be used.

I really hate these "OMG USA IS THE WORST" articles. How we handle money in the US is different than some countries. American cash is often invested and/or invested in their retirement via the 401k system, as opposed to the pension system controlled by the government or a union.

There's probably a good discussion to have about spending, how poor young people are, college tuition, and retirement savings and such, but not with this data. Net worth is probably what people are looking for when having these kinds of conversations.

http://www.fool.com/investing/general/2015/01/26/the-average...

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