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Comment by jandrewrogers | Hacker News Reader

This is because savings accounts are an anachronism from another era and serve no modern purpose. It is misleading to conflate savings accounts with savings; no one I know puts their savings in a savings account and many people with plenty of savings don't have one at all. It would be surprising if most Americans had and used a savings account in 2018.

In the US, the median disposable income -- money you can either save or spend on luxuries after all typical living expenses -- is about $1000 per month. Savings are not an issue for the majority of Americans. Unless you define it as having a savings account with money in it.

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Do they perhaps mean "free cash float", that is (regardless of what the account is called) money that is immediately available to spend without causing a cashflow disaster later in the month?

What do you do with your cash if not put it into a savings account?

Checking account?

Not sure why banks make any sort of distinction anymore.

I don't understand. Checking accounts have much lower interest rates than savings (or money market) accounts, so why keep cash in a checking account?

Given the extremely low interest rates savings accounts have been delivering, short term cash can go to wallet, or checking, and any cash you don’t need short term should go someplace that will earn more than a savings account, like a mutual fund or at least a CD.

Not the OP, but I keep 1-2 months of normal spending in a checking account, and any excess income beyond that goes into investing in index funds. In the rare case that I need to have a lot of cash available for a big upcoming purchase, I'll either just keep that in my checking account too or in a money market account to generate a bit more interest. I do technically have a savings account, but I can't think of a good reason to use it.

EDIT: maybe if my savings account paid meaningful interest I'd use it more, but most retail banks these days don't.

Some banks are pushing towards a 2% interest rate and still FDIC insured, though they're only online. It's not great but part of a diversified account structure for us.

What interest rate does your savings account get?

Most of my savings are for short-term things currently (tuition mostly) and so it sits in a savings account with one of the higher APY banks (Ally, Alliant credit Union, and the like). However, when it's money I wouldn't have to pay back somewhere soon, it would definitely go to index funds.

You leave it in checking accounts or, if you are looking for interest/return, put it in an investment account. The movement between these accounts is pretty seamless at many banks these days. In my case, there are no fees associated with putting the money in investments so it makes it very cheap to put the money to work.

Savings accounts are essentially restricted checking accounts, so what's the point? The interest rates on both types are the same, at approximately zero (pennies of annual interest on a thousand dollars).

> Savings accounts are essentially restricted checking accounts, so what's the point?

Zero risk, but higher returns than a checking account. You may not care about the difference between 0% interest and 1.5%, but it is nice to have a few hundred $$ extra at the end of teh year.

The thing is that most savings accounts at big banks are closer to 0.15% than 1.5%. I think my Bank of America account made something like 42 cents last year.

Stop using a big bank then

Savings accounts are really only a 'mindset' thing, they serve no real good purpose. If you have a an emergency fund, why not put it into a high yield checking account? It's not hard to get 3-4% APY on $25k, which is far more than you'll get from a savings account. And if you have far more than that, you'd be losing money by having it sit around not getting interest.

Please link to these 3-4% APY on $25k checking accounts that you speak of.

https://www.depositaccounts.com/checking/reward-checking-acc... is a good start. You can also just look for Kasasa in your area. Most have some requirements, like 10 debit purchases a month. A lot of people just buy amazon refills 10 times. For no requirements, Memory Bank does 1.6% up to 250k.

Ah, you meant $25k as a limit because they give rewards and use a high rate for low balances as a technique to get new accounts (and the fees they get from you using the account). Still, I only see one offering above 3% and they pay 0.15% for anything over $25k.

I have a savings account at Marcus and it's 1.7% without any minimum, a high $1M max and no goofy rules to jump through.

Correct, and it's location dependent. Typically, there are no fees associated with these accounts. Many have multiple accounts at the same institution, or spread. From my minimal research, it seems you should be able to say, have 25K in each Consumers Credit Union, and Heritage bank, and effectively earn about 4% on $50k (NOTE: I'm not endorsing either of these institutions, do your own research). Though with requirements attached for each, which may or may not be worth the opportunity cost to you. The 1.6-1.7% rate seems to be the going best for no requirements involved.

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