It's very sad. I strongly believe that far, far fewer people would be doing this kind of risk-taking if their savings account was yielding at or above inflation, as it did from the 80s to around 2005.
Back when this contest was running bank savings accounts paid enough interest that there was a real loss of having all your money withdrawn. I'm not sure what year this was, so I can't look up the interest rate, but a couple thousand lost per month isn't an unreasonable estimate.
This year. Meanwhile it would have missed out on 27% in gains the previous year (and its associated dividends), if I kept it in a bank account.
Also that 20% loss will most likely recover in time. Inflation almost never reverses itself, it only slows down.
There's a reason rich people park most of their money in assets, and not in savings accounts. If they got more returns by keeping it in savings accounts, they would do that.
Elsewhere in this thread posters are talking about users losing their "life's savings", but you're right perhaps they weren't investing. Maybe they just wanted to park money someplace they viewed as safer than a traditional savings account or treasury bonds.
What gains? Depositors weren't getting gains, they were storing money in very low interest (far below inflation or money market yields) checking and savings accounts.
People are losing money by simply having it. Even if you store it in a normal bank account that gives interest rates inflation will eat up the interest and then some.
Most people aren't thinking they're losing their money because the bank sets itself on fire; they're thinking they're losing their money because a savings account interest rate is well below inflation.
I can also pretty much guarantee that very few individuals with >$250K of savings are keeping it in a bank. It's in a brokerage account in some combination of bonds, money market, and equities.
Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that.
It never recovered. I never saw that rate go above 1% ever since.
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
Younger people are saving more cash than ever -- and I'm not willing to chalk it up to financial illiteracy. Even well-off individuals are sticking to plain savings accounts that do nothing other than gather dust with their 1% annual rate of return.
Why? Faith in the financial services industry has been utterly shattered.
The only exception is for tax purposes, eg: Roth IRA/TFSA, 401k/RRSP, etc.
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.
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