I learned "max 2 salaries in a bank account because you are being stiffed otehrwise as the bank doesn't pay interest rate" since I was a kid. It's as much hammered into me as "keep N months salary in savings".
Funny world. Negative interest rates would have been unthinkable a decade ago. Yet, here we are about to normalize that savings in a bank account are not okay.
> I learned "max 2 salaries in a bank account because you are being stiffed otehrwise as the bank doesn't pay interest rate" since I was a kid. It's as much hammered into me as "keep N months salary in savings".
There was a time when you put your money in a savings account and the bank will pay a reasonable interest to cover inflation and give you some extra. (The power of compound interest, anyone?). People's memory are insanely short.
Here is also what you might be missing: Central interest rate will gradually affect all aspects of economy and thus all investment vehicles. 0% interest means that any investment with yield will carry risk. Negative rates will mean that for society, on average, they'd be losing money on their investments.
A consumer can offload all of the risk to the bank (and the underlying guarantee, usually state), in return for most of the reward. Example: I can open a savings account with some restrictions (minimum balance, or restricted withdrawals) and since the bank is now in a better position to invest my money, they can offer me an interest rate despite central rates being 0%.
For example, a $50 minimum balance but free withdrawals gives me 0.6% interest rate, with state deposit insurance. That's not "risk free" since there are other risks than that the of the bank (currency risk, not least) but it's the exact same risk as any savings account.
There is a pattern/trend, and the banks started with a certain amount and now lowered it. If the trend carries on, it's a matter of time before what you suggest is no longer possible.
Going from receiving interest to paying interest is psychologically shocking, but not financially. We have always paid the bank to hold our money, it's just called inflation.
Around 15 years ago, I was getting something like 8% interest from my UK-based ISA account (an ISA is a kind of tax-free saving account in the UK). Now typical rates are more like 0.5%.
I just bought a house. Do you know how nice it was to not have to cash out investment accounts and move cash around? I just wired the cash directly, as it should be.
For a lot of people repaying other debt like mortgages can be an efficient form of saving.