Where Americans are keeping most of their savings—and why it’s a problem

You’ve likely seen headlines about how America has a savings problem. Many Americans couldn’t even put together $1,000 to pay off an emergency expense, and most are coming up short in terms of retirement planning as well. But one of the most alarming statistics, and one that is less frequently cited, is where those who are saving are actually putting their money. According to results from the Equitable Consumer Finance Survey for Q1 2024, “Seven in 10 surveyed Americans use their checking and regular savings accounts to put aside money for the future, including retirement.”

Most savings accounts have a negative real yield

According to the Equitable survey, 70% use checking or regular savings accounts to set aside money for the future. This is bad planning on a number of fronts. First off, money for any long-term purpose, such as retirement, should never be kept in a savings account. The net real return for savings accounts — which is determined by subtracting taxes and the rate of inflation from an account’s yield — is negative. This means that if you put all your retirement money into a savings account, by the time you retire, you’ll have less purchasing power than when you started.

Even worse is the fact that the respondents to the survey didn’t even choose high-yield savings accounts, which provide a return of 10 times or more of what a standard savings account offers. According to the Federal Reserve, for example, the average savings account rate in America is currently just 0.46%, but many high-yield savings accounts pay over 5%. That’s a much better option than keeping your money in a traditional savings account, but it still likely has a low or negative real rate of return after you factor in inflation and taxes.


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