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.
The problem with talking about averages is that it hides differences between people. Apparently some people save too much (there is a lack of profitable investments and interest rates are low due to supply and demand) while other people save too little (they don't have enough savings for emergencies, let alone retirement).
Well no, that was exactly my point. People who are privileged and don't have anything stopping them from saving, still don't and screw themselves over.
If that's true, then people for whom it's difficult/impossible to save are completely screwed, and we need to chance something, because the odds really ARE stacked against them.
It is crazy that for a standard "Savings" account:
- interest earned is less than inflation.
- I pay tax on that interest earned.
"Saving" money in a common savings bank account pisses away value.
Many people are not capable of more financial management capability.
The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up.
Ultimately, poor people don't own things that make money.
They are not "rent seekers".
They don't own stocks or real estate or anything else where the simple act of ownership makes money.
The benefits far outweigh the negatives for households making less than the median income. Worrying about longer term possible issues isn’t exactly high priority for the tens and tens of millions of Americans living paycheck to paycheck.
The number of Americans with reasonable savings is not a huge amount.
It seems more like people who look down on people who want things like this especially at places like HN either aren’t in America. Or make above average income while not being fully aware of their privilege.
Maybe this is pedantic to some but I despise the inequality comparisons with pure savings.
Sure, if you stuffed your post-tax $500k into a savings account it’d take 2 and half decades to be in the 1%. More realistically, if you simply invested each month with a historical return of 7%, you’d get there 10 years faster.
It just serves to be disingenuous about inequality. Zuck didn’t stuff a big paycheck into a savings account, because he wouldn’t be that rich either if he had. Level the hypothetical playing field so comparisons are actually reasonable.
I agree that being able to save so much is a very privileged position. It also, though, represents a proportion of total dollars that is greater than the proportion of its constituent people. The headline number given isn't X people; it's X dollars.
How is it the system's fault if you handle your money wrong? Saving does not mean to let it sit around on your table (or bank), doing nothing. The problem is more that the system is build for smart and educated, those who know how to handle money and life. Bringing everyone on this same side is the crucial part of a fair society, and most societies today seem to fail to some degree with this.
No, it’s not for every individual. It’s on average. My point was that for people like you where 70% is overly high and you’re already saving a lot, you’re skewing the other side of the equation as well. The big picture question is whether people have enough money saved. High savers such as yourself make the picture look better than it is, even if they are high earners, making the situation seem worse than it is.
A limitation of this study is that it defines “retirement savings” as money in literal retirement accounts. Due to the perverse structure of how most retirement accounts are tied to employment and the rules around them, there is no vehicle for a significant percentage of Americans to actually put significant savings into retirement accounts regardless of income. As a consequence, a not small subset of Americans have much or all of their retirement savings elsewhere out of necessity. Another subset has a strong preference for rental real estate, which again is outside of the “retirement savings” rubric even though that is literally their retirement plan.
I know quite a lot of GenX that would be impoverished in retirement as defined in this study that are actually quite well off. This is like the oft-quoted study that shows Americans can’t pay for a $400 expense from savings, where “savings” is defined as “literally having a savings account”, which few people even have anymore regardless of income or wealth. It paints a misleading picture.
It would also help if the government didn’t tie retirement saving so closely to your employer. Retirement saving limits should be the same for everyone, regardless of employment.
I guess it's hard for some people to relate to a large portion of any future savings being 'invested' in lottery tickets ("the money just goes towards your college education either way!") and spent on cigarettes -- not that hard at all when it's been your reality.
I couldnt agree more, for almost 2 years now I've alocated 20-25% of my post tax income to savings.
I had to change my life style for a bit but for the most part for the better (e.g. I cook 95% of my meals now) everyone i told this too responded by sayingn something like: wow you are really smart with money and how brave bla bla. The truth is I'm not smart I don't invest the money like some stock market shark I'm just lucky enough to be able to afford to do give up on 20%+ of my income.
Saving money isn't a question of intelligence or even will for most people it's a pure issue of affordability.
I think that we can assume that for people worth low income, savings rates will be much lower than for richer people.
Sure, we can't "exactly" know from demographic information, but the fact that if you have a higher income you have a higher savings rate is pretty basic.
Ugh no. The main reason we have a problem with a lack of saving in the U.S. is that we spend like our parents did but are paid less than they were. If the wealth didn't always flow to the top, we'd be just fine. But sure, go ahead and blame the poors for not saving enough money.
Obviously "savings account" and "in savings" are not the same thing. This survey and article don't seem professional - basically this is clickbait or they are clueless.
But the main issue still is real. Regardless of "savings account" status, other studies show ~half of Americans are financially insecure today. Should an emergency expense of $2000 come up they don't have it.
The problem is getting worse as baby boomers retire. If you include underfunded retirement savings in the group at risk then the vast, vast majority of Americans are in a financially insecure position.
Pew Trusts did a study as well: "One in 3 American families reports having no savings at all, including 1 in 10 of those with incomes of more than $100,000 a year."
"41 percent did not have enough liquid savings to cover the $2,000 cost of the typical household’s most expensive financial shock."
You show the change in net worth, but they're saying that they see savings as different and I get what they mean.
Person 2 in your example has the same net worth but not the same access to the money. If a sudden bill comes in then being $2k lower in my debt vs $2k in a savings account are functionally very different.
That's not to say one is right or wrong, but they are different.
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.
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.
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