I don't know the last time I had money in a savings account. Probably decades. Even when interest rates were higher I remember savings account interest was pretty paltry.
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.
Savings accounts used to pay anywhere from 5 to 8 percent back when inflation was 1 to 2 percent. You didn't expect to live off the interest, but you did expect the drain rate to be far less than with effectively zero interest.
Ironically, returns on bank savings accounts have been so low for so long that my present APR of like 1% is functionally the same as if they just held onto the money for me. That would probably do a great deal to explain why no one uses savings accounts anymore
Kind of a stupid statistic, how much people have in their savings account. With interest rates so low, a savings account is basically worthless. The more interesting question is how much they have saved in total, across all accounts and investments.
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.
Through most of that history, interest rates in savings accounts exceeded inflation, often significantly so. So I find this unconvincing. Obviously not a great investment comparatively, but the number in the account is going to be significantly higher.
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.
I'm sure a few of the readers here recall when most banks guaranteed 5-1/4% annual interest on savings accounts. Then the Savings and Loan debacle, then no interest any more. Banks screw up, who gets screwed?
That was the point of zero interest from the Fed. When the interest of a savings account is barely better then keeping cash under the mattress, it encourages people to spend/invest their dollars instead of hoarding them. Whether that actually makes sense in the long term remains to be seen.
I think we’ve finally hit the point where compound interest on savings is outpacing inflation (at least in the US). Savings accounts at 5%+ interest are now widely available as long as you avoid the big banks like Chase and BofA. Meanwhile inflation is still elevated, but at least its well below 5%.
OTOH, the prior 10+ years even when inflation wasn’t very high, 1% or so interest rates meant savers were falling farther and farther behind.
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