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How much they have in a savings account? Who has a savings account? I have $5 in my savings account because my credit union makes me. It has around a 0.025% interest rate so I would be stupid to put any more money into it.

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This website seems to consider any asset account besides checking as "savings account", including CD, IRA, 401(k), and stocks/bonds.

See https://www.gobankingrates.com/personal-finance/how-save-mil...

The bottom of the page says:

Methodology: This GOBankingRates.com survey posed the question, “How much money do you have saved in your savings account?” to 7,052 people among all 50 states and Washington, DC. Responses were collected through a Google Consumer Survey conducted from Aug. 1, 2016, to Aug. 9, 2016, and responses are representative of the U.S. online population. The survey has a 2.6 percent margin of error.

Yeah I totally think that's ambiguous, and people are likely to answer that under the definition of savings account as "my low-interest bank account that isn't my checking account" but the authors of the study actually meant "any account you use for saving money besides your checking account, including retirement".

If they asked me how much money I had in savings, I would guess they are referring to money I have either in a savings account, or with an investment firm or somehow saved for my retirement. And not specifically in a savings account.

According to the article, the question they asked is literally, "How much money do you have saved in your savings account?"

The results are not really too dissimilar from the Fed study sited by The Atlantic earlier this year. In my not so humble opinion the question asked as part of the Fed study is more robust but the conclusion is similar. http://www.theatlantic.com/magazine/archive/2016/05/my-secre...

According to my dad, savings accounts used to actually be worth using when he was a kid. The interest rate meant you would actually earn a (relatively) substantial amount of money if you put extra cash in there and left it for 10 or 20 years. But these days you'd only have gained a few dollars in the same amount of time. Savings accounts are pointless now.

Even a decade ago, "high-yield savings accounts" were a thing, earning 5% interest. But that occurred during a time when the federal funds rates were quite high as well, and inflation had a comparable rate, making the interest rate illusionary.

In practice, savings accounts are never likely to significantly outpace inflation.

Well, and for fairly long stretches of time over the past fifty years or so, money that you stuck under the mattress or otherwise in non-interest bearing accounts was taking a fairly substantial hit in value every year due to inflation. Currently, the return on just about any near-zero risk investment (CDs, Treasuries, bank savings accounts) is so near zero return that it's probably not even worth dealing with for any modest sum of money.

I suspect there was an element of access and liquidity, especially for small amounts. It was a lot easier back then to go to your local bank to ask your teller to put money into your savings account than buy bonds, stocks, etc.

Nowadays with e-trade and the like, it's as easy to use much more sophisticated investment mechanisms than back then.

That has zero to do with it. Interest rates around the globe are much lower than they were in the past (to the point of trillions in negative interest bonds where if you hold to term you're guaranteed to not get back your investment!). There is currently too much cash in the world without good places to put it, hence plunging yields. The short version: your bank doesn't pay much interest because they have no great higher yielding places to put your deposits to work.

http://www.cnbc.com/2016/06/29/there-are-now-117-trillion-do...

The interest rate on savings accounts is pretty well synced up to inflation and the interest rates banks pay to the Fed.

Banks weren't giving 5% interest out of the goodness of their hearts. They were giving 5% interest because they could leverage that deposited money to make more than 5% elsewhere. Today, they can get essentially interest-free money straight from the Fed, so there's no point in paying much interest.

Ask about his mortgage rate at the time though... Interest rates are a double edged sword.

Honestly I'd much rather have had a high rate back then as it meant home prices were lower. Now that rates have plummeted that could be refinanced into what might be quite a decent amount of savings.

Hindsight is always 20/20, but it wasn't an obvious slam dunk to buy a home with an 18% loan. That's like paying for your house on a credit card. It was even more unaffordable then as it is now (on average, obviously individual markets vary--SF is more $$$ and Detroit way cheaper).

http://finance.yahoo.com/blogs/just-explain-it/why-mortgage-...

> Affordability dropped to an all-time low as rates climbed to record levels. Simply put, mortgage rates priced most Americans out of the market, and it took years for home sales to rebound.

> I would be stupid to put any more money into it.

As a millennial who will not be retiring (period) unless severely injured, where else would I put my savings? My checking account rate is 0%.

Whole Term life insurance only can be "cashed in" after building 20+ years.

I'm holding some long term positions in stocks (risk), but honestly, I cant find anywhere else I would put the bulk than a savings account.

Could buy homes to rent out.

90% VTI 10% BND. So far, 6.3% return this year (based on arbitrary pay ins, no market timing used)

Fellow millennial here. I'd recommend investing in stock indexes. Your money, on average, will grow at a faster rate than inflation. If you leave your money in a checking or savings account, you will lose money to inflation.

If you're interested, I'd check out:

- The Mr. Money Mustache blog (my personal favorite)

- r/personalfinance

- patio11 also wrote an article on investing recently: https://training.kalzumeus.com/newsletters/archive/investing...

A relevant MMM blog post (there are plenty others): http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-...

There are also a lot of other blogs if you're not into his philosophy or writing style.

Edit: Just for clarity, I know that you said you invest in stocks currently, but I was mostly speaking to, "I cant find anywhere else I would put the bulk than a savings account." I don't have a savings account, and I treat my investments like savings. You shouldn't need a lot of money in your current savings account, but you should have a lot in investments. If you feel the need to have a lot in your savings account, I'm guessing it means you take money out of it often, in which case it might as well be in a checking account. Just my $0.02.

Very much appreciated!

Do you self-invest, or hire a professional, or mixed?

Currently I'm managing my own stocks. My employer, my IRA and other monies I'll never get to see.

To start off, I used Vanguard and did it all myself, which is a great option (many would say the best). I've since switched to Wealthfront, which is also pretty cool, although some people believe their slightly-higher fees don't buy you anything[1]. I personally disagree!

The general consensus from what I've read on investing is that it's impossible to beat the market consistently, so "professionals" are no more skilled than someone picking out random investment decisions from a hat :) On average, the market as a whole grows, so there's no real reason to try to risk beating it.

The MMM blog covers all of this in great detail, but if you're interested in chatting more about this stuff (or if you want a referral to Wealthfront for reduced fees!), hit me up. My email is [myusername]@gmail.

[1] https://medium.com/@blakeross/wealthfront-silicon-valley-tec...

> The general consensus from what I've read on investing is that it's impossible to beat the market consistently

The slight addendum to this is that advisors can help with risk tolerance, tax efficiency, and explaining concepts, but as you mentioned Robo-advisors like WealthFront arguably do a good enough jobs at these topics to bridge the gap.

> To start off, I used Vanguard and did it all myself, which is a great option (many would say the best). I've since switched to Wealthfront, which is also pretty cool, although some people believe their slightly-higher fees don't buy you anything[1]. I personally disagree!

Interesting! I switched from Betterment TO Vanguard once I didn't need the guidance they provide (and corresponding higher asset management charges) anymore (target date funds in retirement accounts, life strategy funds in taxable accounts for extreme early retirement Mr Money Mustache style).

Thank you!

I will reach out if I choose WF, I'll do some research between the two.

> I'm holding some long term positions in stocks, but honestly, I cant find anywhere else I would put the bulk than a savings account.

Unless you have a reason to be risk averse, then continuing what you're doing is probably best (e.g. ETFs/mutual funds/stocks/bonds). Buying into the market is a great passive way to grow your wealth.

If you're looking for near-zero risk, there's really nowhere you can invest that's much above 0%. The good news is that inflation is also near 0%. (Although that's not much consolation is you're trying to save up for housing in areas where that's appreciating rapidly.)

Saving has always been about taking a portfolio approach. Risk free investments have never had a great return relative to inflation. (Because basically they can't.)

Uhm - how is inflation at 0%? Core inflation (which ignores health, energy, food prices) may be low, but real inflation over the past 10 years has been very high - I'd say probably close to 50% total.

> Core inflation (which ignores health, energy, food prices) may be low, but real inflation over the past 10 years has been very high - I'd say probably close to 50% total.

And you'd be wrong.

Inflation as measured by the CPI-U-RS (not the "core" version, which excludes food and energy -- not "food, health, and energy" as you stated), looking at end of year indexes to get annual inflation over the Dec. 2005- Dec. 2015 period had a high of 4% per year in 2007 and a low of 0.06% in 2008, an average of 1.87% per year, and a total of 20.28% increase in price index over the 10 year period -- the average of that period is just over half the average annual rate of inflation (3.36%) of the Dec. 1977 to Dec. 2015 period, so its hardly been "very high" in the last 10 years.

And the last two years have been, while not as low as 2008, still not far from 0, with 0.76% in 2014 and 0.72% in 2015.

(Source: http://www.bls.gov/cpi/cpiursai1977-2015.xlsx + math.)

You'd have to provide numbers to convince me about food and energy costs (the latter of which have been historically quite variable in any case). A quick look at food pricing says that restaurant pricing has gone up faster than raw goods pricing.

Yes, health case has certainly increased by significantly more than the CPI. As has housing in some areas (but not in others).

In any case, a 2% annual increase of prices still amounts to something like 22% over 10 years. But 2% is still pretty close to zero inflation relative to many historical periods.

The traditional advice for long-term (7+ year) savings is a mix of low-cost index funds and bonds.

Other options include real estate (either by directly buying property or via a REIT), "accredited investors" could angel-invest in startups, and some people really like owning gold/precious metals.

I own some silver! Although that's more of a catastrophe hedge, hah.

Unfortunately I don't have enough capital for real estate, but I've gotten some great replies to my (parent) on going for index funds.

I've done well with bitcoins. If you look at just about any 1 year or 2 year or 3 year period, bitcoin has had great returns. There were only 2-3 spikes you could have bought during to lose money on a long position.

EDIT: I invest in this in addition to my 401k which is 25% stocks and 75% a guaranteed return fund. I wouldn't recommend bitcoin exclusively.

Max out your 401k and Roth IRA. You won't be able to retire by saving cash unless you have an extremely high savings rate relative to your income -- and even then, inflation will erode the purchasing power of your cash.

Don't buy whole life insurance. It's a pretty bad idea.

My bank insists on calling its high yield savings account a checking account. In the past banks tended to value savings accounts because the Fed requires less reserve on these. Nowadays reserves are more than abundant. Investors tend to value checking account deposits more because they think transaction accounts are more stable over time. So it is a naming game.

What do you use to hold your emergency fund? I agree with you regarding the useless interest rate, but I can't think of a better way to have money immediately available in case of unexpected expense. Do you just use a checking account for that?

A CD ladder or I Bonds will earn more than most savings accounts and is still risk free and easily accessible after a short period.

Credit cards are fine for it. The logistics of getting money out of a savings account is slightly more annoying than a card if you are in an emergency.

Many Americans depend on their credit cards to cover unexpected expenses.

Checking accounts, but you need a lot less in your "emergency fund" than you think you do. You don't need 6 months of salary in your emergency fund. In a true emergency, you can always get money from an index fund with at most a few days' notice (one business day). If you need more money than your checking account in less than a few days notice, and you know you can easily cover it by selling shares from an index fund, then charge it to a credit card. That doesn't mean you should ever carry a balance or pay interest; it just means you rely on the fixed period of time between charging something and paying the bill to give you time to sell stock.

If the market tanks again like it did 9 short years ago then pulling your money out will be immensely painful.

Sure. But consider the relative risk of having a large-scale emergency requiring you to sell a large amount from an index fund in a hurry, versus the much more definite loss of return of having large quantities of money in a savings account rather than invested. (Also consider what other mechanisms you have covering such emergencies, such as various forms of insurance, disability coverage through your employer, etc.)

The inflation rate is 1.1% for the past 12 months - its not ideal but IMO its not that terrible relative to the risk of a market downturn blowing up your money. Maybe its a generational thing - I watched the .com bust and then 2007. Stocks are at their highest point ever right now - I'm not so sure it'll beat the mattress.

I went through both of those busts, and had (a small amount) of stock during the first one. That's when I learned never to buy individual stocks, to do dollar-cost averaging (with a fixed amount every paycheck), and to not pay attention to short-term returns.

Another way to look at those two busts: "hey, the market's on sale right now, the fixed amount I put in buys more shares right now".

A credit card. I have generally 30 days to convert non-liquid assets into cash to pay it off with no interest payment. This is the whole point of credit cards in my opinion.

I don't subscribe to the advice that I need 3 to 6 months of cash sitting in a 0.00% savings account "just in case." I'm not sure why I would need that much money for anything.

I can get several thousands of dollars from my brokerage to my checking account in a matter of days. Most other emergencies allow me to arrange payments. I don't know why this is such a bad idea, it has worked great for me so far.

That's what I do.

Its strange how banks reward checking accounts but not savings accounts. I get no reward or benefit from my savings account. Due to holding the balance in my checking, I get all my ATM fees auto reimbursed. Its not much but its worth more than keeping it in zero interest savings.

There's also a time issue. I have plenty of credit so for less than a week I can use my CC and for more than a week or having to sell stock wait for the transaction to clear and transfer from my brokerage to my bank.

I have gotten into time crunches like when my old car died and I wanted $10K or so for the downpayment on the new car and I needed a cashiers check like that weekend, but in the end everything worked out alright.

Many years ago I used to participate in Treasury Direct back when the interest rates made that worthwhile. Treasury Direct is (was?) a US treasury program where they'd direct debit and direct deposit t-bills, bonds, etc. Kinda cool back when the interest rate made it worthwhile. I remember some years after I stopped using it they did very early 2FA and I still have a card covered with random numbers laying around somewhere. TBills were sold at a discount for various terms so magically $99XX would disappear from my account and then a month or quarter or whatever later $10000 would direct deposit reappear. Its not worth the effort anymore of course. Maybe if I had $1M.

I'm not sure why I'd need to save money anyway. Lets say I saved $10K and got $500K of medical bills or $500K of some kind of legal judgment against me, the only effect of having had $10K in the bank is that I wouldn't have enjoyed having it. Its not like the hospital or IRS would walk away satisfied with $490K unpaid.

What do you use to hold your emergency fund?

Fidelity brokerage account, with very tight stops on any equities that are held in that account (to avoid a pinch should the market poop itself). It's not instantly liquid, as you'll have to wait three days after you sell equities. But my account is a margin account, so I can have nearly instant access to cash (at 7%-ish, IIRC) if I don't use the margin balance for trading (which I generally don't). IOW, I can extract cash from the account via wire transfer, check (if I can ever find the checkbook for that account), or debit card and because I'm using margin balance the equities don't need to get sold.

The caveat is that using the margin balance is for a short-term need, like maybe go buy a used car and pay the account back using other funds later. I would not recommend using the margin balance for, say, living expenses after loss of a job. For that you sell the equities.

Yeah, my interpretation is that people are not storing their wealth in dollars, which is a bad sign for the currency.

It's not so much that dollars are the problem, it's that there are more lucrative ways to store money, ways which actually get returns. Savings accounts today are just a slightly more secure way of hiding money under the bed. Whereas if you invest it in basically anything else, you'll have a much better chance of it increasing, with often times very low risk of it decreasing. Modern savings account plans are the real problem here.

What gives higher returns but near-zero risk?

Bonds, at least? Mutual funds that make use of bonds?

(This is a question, not an answer, by the way. I have no idea.)

Bond rates are low too and have transaction costs. Very poor substitute for a savings account with an emergency fund.

http://www.bloomberg.com/markets/rates-bonds/government-bond...

(.27% for 3 month treasuries, just .79% for 2 year)

Short-term, low-risk bonds (like T-bills) have super low interest rates also.

Longer-term bonds are significantly higher risk than a savings account.

Treasury Series EE Bonds (~3.5% yield...)

These are vulnerable to changes in interest rates. If interest rates increase, their value drops.

They are guaranteed to double after 20 years (hence 3.5% rate).

In current dollars.

To explain a bit more what I mean by interest rate risk: Imagine I buy $1000 in EE bonds today. Then tomorrow, conditions change, and the government starts selling 20-year bonds with a 7% rate. My bonds are now worth much less than $1000 -- no one would buy them from me on the open market, except at a substantial discount, since they could just buy the higher-yield ones for $1000.

These conditions that led to a higher interest rate are probably also leading to a higher inflation rate. So my $1000 is locked up for 20 years in an instrument where it's decreasing in real value.

Yes, I know that. EE Bonds are not intended to be that liquid, they are meant to be held to maturity.

Okay... so they're higher risk than a savings account.

Well, depends on what "risk" means...default risk? Inflation risk? How about currency risk? What if the dollar gets weaker? You need a totally different hedge for that...a savings account would not help.

You also nicely elide that since a savings account currently averages a 6 basis point APY[1], it's already giving an inflation adjusted negative return. So a savings account has gone past the "risk" stage to the "losing money" stage.

[1] https://www.fdic.gov/regulations/resources/rates/

In any case, my answer was only half-serious.

But you wanted to know "What gives higher returns but near-zero risk?" and assuming by "risk" you meant "default risk" there you go....a high interest low denomination savings instrument backed by the federal government.

Index funds, through a reputable and low-overhead fund like Vanguard's; you'll never do worse than the market. They can absolutely go down, so don't put any money in them that you might need right away, but as a long-term investment, they'll always give you a rate of return approximating the overall economy.

You're basically saying the same thing as I am.

I don't deny that there are better investment vehicles than a savings account. I'm just asking whether there is something of similarly low risk with a better interest rate. Stocks are definitely not lower-risk.

Stocks are not low risk. Stocks are not low risk. It bears repeating.

Index funds aren't individual stocks. They're pretty low risk. If an index goes to 0, T-Bills, CDs, and cash won't be worth anything either, you'll need shotgun shells, generator fuel, and canned food.

Index funds are stocks. The market contracts - frequently. Over long periods of time its gone up.

See the chart below [0] - If you invested all your money in 1965, there is only a 8 year window at the end of the 90s where you would have averaged a 3% return per year. Much of the rest of the time you're looking at negative returns.

[0]: https://static01.nyt.com/packages/images/newsgraphics/2011/0...

If you invested at the worst time in the past century that would be bad. If you invested in T-bills or CDs you'd have gotten murdered by inflation in that period too. NYT piece you're referencing says the average annual return over 20 years is 4.1% net of taxes, fees, and inflation. Not too bad.

This isn't what "near-zero risk" means. Near-zero risk investments are things like savings accounts, CDs, and T-bills. Index funds that track stock-based indexes are intrinsically risky, as you yourself point out, unless you look at time scales of a decade or more.

Near-zero risk of what? If you mean "risk of decreasing in value", then checking and savings accounts aren't near-zero-risk either; cash tends to decrease in value over time due to inflation, and you're nearly guaranteed to lose money over time (though somewhat predictably). If you mean "risk of disappearing completely", then neither a savings account nor an index fund will do that.

A comment further up the thread asked for "very low risk"; the reply to that changed it to "near-zero risk".

Better to consider the type of risk you care about, and how much money you want associated with each type of risk. Checking accounts and index funds both make sense as part of an overall strategy. I don't know that savings accounts do, though, except perhaps as a purely organizational tool.

Risk is about uncertainty - how well you one can predict what will happen to the money.

Short-term federal debt funds like VFISX and VSGBX have very low risk and do better than most savings accounts. The risk is probably close enough to zero for most people, considering it's basically all interest rate risk on short-term U.S. federal government bonds.

Most Americans aren't constantly moving dollars between investment accounts to eek out more interest (a terrible idea for many reasons!). In a world of negative interest rates, US savings accounts aren't so bad. The problem is most don't have adequate savings.

You're probably thinking to deeply about this. I think most people are "storing" their money in consumable assets that they are likely immediately consuming - aka broke. Thinking about what you have your money in is pretty high level for a lot of people I think.

Actually it's more like a very significant amount of people have the majority of their net worth "stored" in their homes.

https://www.census.gov/people/wealth/files/Wealth%20Highligh...

(Direct link to spreadsheet here: http://www.census.gov/people/wealth/files/Wealth_Tables_2011...)

It's kind of difficult to fully read this 2011 survey since "percent holding" and "median value" is in two separate tabs, and it's hard to get a good sense of correlations. But the spreadsheet seems to show:

- Almost 70% of people owned a savings account, with a median value of $2,450 overall.

- 29% of people own a checking account, with a median value of $600

- 85% of people own a motor vehicle, with a median value of about $6,800

- 65% of people own a home, with a median equity value of $80,000

- 42% of people have a 401k, with a median value of $30,000

- 29% of people have an IRA account, with a median value of $32,000.

By far, it appears that housing is the most valuable asset many people own; at least, in every category, the median for housing is higher (sometimes up to 6 times higher) than the median for a 401K account. Also, it seems that a far more percentage of people have houses compared to 401Ks, the next largest category with >$10K median assets.

Now, is it a bad sign? The only things I can say:

A) Houses are hardly a "liquid asset".

B) Home ownership for many reasons is declining (http://blogs.wsj.com/economics/2016/04/28/u-s-homeownership-...).

The later point makes me wondering if future generations' preparation for retirement may be impacted. The former is not a bad thing if you do have liquid assets for emergencies etc, but I can imagine there is a significant percentage which do not. (A 401K really isn't a great "liquid asset" for instance, and some probably don't have much of that.)

That percentage for checking accounts is extremely low, and suggests that half of homeowners don't have checking account, and only a third of car owners do.

I cant reconcile how that large of a discrepancy is possible. Surely some people inherited houses or cars, or paid literal cash, but it cant be that many.

edit: This FDIC report [0] from earlier this month suggests only 7% of households are "unbanked", meaning they dont have access to a bank account (doesn't specify what type). That number makes way more sense.

[0] https://fdic.gov/news/news/speeches/spsep0816.html

Is that yearly/daily/monthly?

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