Why is it considered bad/stupid to have a savings account?

I have learned many financial lessons in life. I try to pass down what I have learned to others, especially younger people I work with.

I am amazed how many people I work with who believe having savings (or insurance, for that matter) is not important.

From younger people I can understand. (the ones who have never lived on their own) For example, there was an 18 year old that worked at my store several months ago. I was talking to her about credit cards and she told me she just got one and actually told me how amazed she was that they gave her "free money". I explained to her that it was the farthest thing in the world away from "free money". I hope she took that advice, but I was still amazed an 18 year old was never taught that.

Still there are older people I work with who SHOULD know better. I always tell my co-workers who typically range in age from 20-50 that savings is the most important thing they can have in life. Almost none of them agree with me. They see no value what-so-ever in savings.

I always encourage everyone to sign up for the company 401k - which matches your contribution *dollar for dollar* up to 7% of your annual pay - and you are 100% invested in the match the first day you contribute. (Truly, FREE MONEY)

You would be amazed how many people opt OUT of the 401k. They see absolutely NO value in it - even though they are able to get a dollar for dollar match of contributions. (as a side note, the company also offers 6 TIMES your annual pay in life insurance for around 20 cents a pay check, which you can take with you after you leave the company, and almost no one signs up for this either)

I have lived life in two situations.

The first, living check to check. Worried if something happened and I lost my job what would I do? Having debt to worry about, and sending every check I made to the banks.

One day I seriously took a look at my financial situation. I asked my self - what the hell am I doing with all these credit cards? What the hell am I doing with a car payment that takes 30% of my monthly pay?

So I started with my second life, living with savings. I now have Vanguard mutual funds, a 401K, a pension, IRAs, savings accounts, CDs, and even a few shares of some stocks. I owe NOTHING to any bank, and the banks pay ME money now... and I've worked retail most of my life.

Guess what? I drive a shitty car that's over 20 years old, but it gets me where I need to go - and I learned along time ago that a car payment was just hole in your pocket. I don't have a lot of material possessions, but I live a relatively decent life... and I wouldn't go back to living check to check in a million years. I can not tell you how FREE I feel knowing if I walked in to work tomorrow and lost my job I would have at least 2-3 years of time to find a new job worst case scenario.

I just can not understand why so many people let the banks own them. Well, yes I can understand why. They are damn good at getting people in that position the moment they turn 18. They have convinced us that we can subtitute LOW WAGES with CREDIT. We can substitute SAVINGS with INDENTURED SERVITITUDE, working every day to send our pay checks right back to the people at the top.

They have convinced us that we don't need savings - all we need to do is send every dime we make to them in exchange for credit cards.... and people believe it.

It is a sick sad system and it will destroy the american dream. Mark my words.

People live on the hope that tomorrow will be better, that they will be able to pay for what they want now then.

It is not bad or stupid to have a savings account, just many people live so close to the edge, or over it, that they have none to save. I think people are starting to figure out that there is a lot of stuff they don't need, will stop charging so much.

For us, it is the emergencies that take up the slack. Put into savings, then break a tooth sort of thing.

We need to be clever like the banks.

Instead of "Home Equity line of Credit" - I used the term "Turning your house in to an ATM machine".

Especially the part about how Americans are confusing credit with income. This how the elites can sit there and lie with a straight face about how great the economy is. I mean, hey, Americans can buy a plasma TV today and make no payment for a year! Credit has been propping up our economy for over a decade now. With the mortgage collapse comes imploding lines of credit and we ain't seen the worst yet.

Looks like you've got a pretty diverse portfolio there. One thing you should consider, if you haven't already, is the tax consequences of your investments. If you don't already have a Roth IRA or some type of deferred savings vehicle (whole life insurance can function as one, believe it or not, if you make too much for a Roth), with a tax-free distribution stream, then most of your retirement will be fully taxed. My portfolio has tax qualified and tax free vehicles in it, to hedge against future tax rates.

Theoretically I have spent my entire adult life living and working in a time of low inflation. But that is only because Ronald Reagan changed the gov't formula for calculating inflation. Truth is that inflation has badly eroded my savings. That 4% I put away for the first decade of my career wouldn't last me a year today.

Then the 2001 stock market crash wiped out 50% of my savings in the low interest "guaranteed" account (apparently the fund managers and I have a different defintion of "guaranteed").

I built up savings from day one. At some point in my 40s it finally occured to me that as successful as I have been, and as much money as I have put away, there is still no way in hell I can stop working until well into my 60s.

Odds are that I will die not too many years after I retire. I'll probably leave a nice bundle for my ex-wife's kid. That's something at least.

All of your co-workers will realize their mistake someday, unless they just assume somebody else will 'bail' them out. I know one young woman, 23 years old, who had 2 children by different fathers 10 months apart. She receives decent child support ($460/mo.) from one and nothing from the other. She hasn't held a job in the last 3 months and when she does work it's at McDonald's, part-time. She truly thinks the 'state' will take care of all her needs. She got something close to $3000 in EIC this year and is picking up another $900 from the 'rebate'. The saddest thing is she is a CNA and could be making about $15-19 an hour, but elects not to. I've repeatedly asked her why she wants to raise her children in this way, but she's not worried.

Sort of like I'm not good at having milk chocolate in the house and *not* eating it. I think addictive behavior and denial is behind a lot of this.

and so does George Soros, for example, multi-billionaire who has lived in the same relatively modest house for the last 40-50 years, even though he could EASILY afford anything he wanted. I guess he likes/wants his modest house. There's a real lesson there.

kay & Rrrrr'd

While I am by no means "well off," I have no debts, I own a 1995 car (in perfect condition), I live comfortably on my pension and Social Security, I pay off my VISA bill totally every month and I have some money saved.

There are lots of things I'd like to buy but, like you, I learned my lessons in the old school and I know better than to sell myself into creditor servitude. I'll do without anything I can't afford to buy cash on the barrel-head.

:hi:

Well, the Joneses have already won the second you start trying to keep up with them.

It's an unsustainable cultural phenomenon.

And before I mention it, I would say that I mostly agree with you.

Better to have a savings account than $ 47 a month for five years to pay off a new flat screen plasma TV that will suck up several hundred dollars of energy costs a month to operate.

But there are people out there that would be better off having money in their pockets than paying for a 401K.

If I could have put the money I was forced to put into 401 K and into Social Security into a fund I could have used to advertise the home businesses that My husband and I were trying to build up, we would have had a much easier time of having success.

BUt for a long time, all our "extra money" was taken away by these devices. Involuntarily deducted from the pay check. And as many are now seeing, these pension plans may be "guaranteed" but it has no meaning. Plus the writing is on the wall for Social Security - those of us in our fifties might never ever see it. It'll be worse for those that are younger.

If someone with a home business puts their money into advertising, they may end up with recouping their money far more than if a savings account and far more than some pension fund that is certainly not really guaranteed and that other people, "The experts" as it were, can piss away betting that some "bubble" or other will continue.

Seem like a decent idea to me?

to steal the middle class's nest eggs. So far, it's worked out pretty well for them.

account never hit zero. There is no feeling of security like knowing you have enough in the bank to weather 6 months of unemployment after the last unemployment check has been cashed, something too many of us have faced in the last 8 years.

It gives you the feeling that you can thumb your nose at a psychotic boss and have enough time to find something better.

It keeps you from a state of constant terror of mild illness if you're without health insurance for a period of time.

Debt is prison. Money in the bank is freedom.

Just don't expect people who are in mink-lined prisons of their own making to understand that. They can't. You can't really understand things you haven't experienced.

My employer used to, then 50% now 25%.

8^(

i think the key to your question is in the car...

how many 20-year olds drive a POS these days? okay, so i don't have any demographical data in front of me, but when i get out in traffic here in central florida, i'm always surrounded by kids in souped-up tuner cars with fart cans. by and large they are decent imported cars...with $5,000 to $10,000 worth of mods done to them (i know about the mods b/c the b/f remarks on every single one). on the weekends many of these cars have numbers written in white shoe polish on the rear passenger window -- racing ID. they've "gone down to Bithlo" to race and/or time their cars.

so, why the "investment" in fast cars instead of savings? one word: SEX.

the reasoning goes like this:
a fast car with lots of sick mods makes you HOT.
girls like HOT guys.
make your car HOT, and you will be HOT too.

ergo, SEX.

No one ever got laid b/c they boast a giant 401-K. I'd argue that no one ever really gets laid b/c they drive a fast car or not -- but that's the perception. and it's a crappy one. cars suck. spending all your time and all your money on your car is a depressing waste of productivity.

The people who waste their resources in the biggest possible display of wealth when they're younger have a greater chance of passing their genes along, even if they die penniless and alone.

ie "This car will get you laid."

Therefore the current population is one whose evolutionary advantage was given to those who appeared to have the most resources. In the past this advantage was "Real" in the sense of the person being noticably stronger, visibly bringing in bigger and more game to the clan/family/tribe, winning more contests of skill, or luck, or charisma. It couldn't, or at least couldn't easily, be faked.

Now with credit people still try and appear the most resourcfull, but it can be a false image. The man driving the Ferrari might actually be smart and rich and worthy, but he could also be in hock up to his eyeballs and be penniless and on the street in a year. it's a false image.

What this means for the long term I'm not sure, but it can't be good for our overall genetic makeup if it continues for oh 100 generations or so.... ;)

Consider how many advertisements you see in a day urging you to spend your money on frivolous crap. They are literally everywhere, trying to manipulate us with all sorts of psychological tricks. That has an effect on people. Advertising is just another form of propaganda, only instead of telling us to worship Big Brother it's telling us to go shopping. It's sick and wasteful, but they've convinced people that they have to buy their social status and happiness and put it on a credit card.

Think of how much credit cards spend on advertising encouraging us to run up our debt vs. how much we see reasonable advice like yours. It's ridiculous. These banks and credit companies want people in debt up to their eyeballs, unable to pay, because they can tack on all sorts of fees along with the ridiculous interest rates. That's how they are making all their money. They have every reason in the world to try and continue this racket, and they'll do so by hook or by crook.

Econ 101 and the savings and dis savings graphs. If I remember correctly, the line where savings begins at zero. The other line going in the some direction is the income line. Zero is were people earn just enough to live on. That line begins below zero meaning that some people don't make enough to live on. Savings don't begin until people have excess income.

So I guess the question becomes when do you have excess income. To most people it is never.

The banks rely on it. And people like you and I profit from it. I've made money on interest from my online savings account because that money is lent to people who pay interest. I get cash back from my credit cards that I pay off in full because I can.

I was fortunate enough to have been born into a middle class family that taught me the importance of savings and investment and financial responsibility. I am lucky to not be overwhelmed by debt.

Do to illness or divorce and a million other things many people will never be able to save. I work in Santa Barbara. Most of us working here cannot afford to live here and I make well above average and so does my wife. We have our hotel workers and maids and gardeners here and they will never be able to save. The can't even afford rent on a garage to live in!

Really, I do. I would certainly not want to trade places with them. I know it's difficult for the less fortunate. Our system depends on people like them.

At the same time there are people who went to the same schools as I did and work the same jobs and somehow manage to be in bad financial shape.

But could never bring myself to use my employers 401k. I just don't know what companies it invests in and I don't want to profit from slave labor or defense industry stocks. They use Fidelity. Anyone know if Fidelity offers a "Christian" 401 or something along those lines?

Besides, the 401(K) offered by your company is what it is. For the most part, employees have little say in the overall makeup of funds are made available in such a plan. You might have some luck requesting a particular fund, but if it is not in the Fidelity family, your request is likely to fall o0n deaf ears.

Here is a website that lists "Green" companies and other Clean Technology Companies;

http://www.sustainablebusiness.com/index.cfm/go/progressiveinvestor.stocks/?CFID=2725160&CFTOKEN=93875860

Also, try a Google search of "Socially Responsible Investing".

Calvert & Domini are two Mutual Fund families that offer such funds.

The overwhelming majority of the funds in these two families underperformed funds in similar categories (Large Growth, Mid-Cap Growth, etc) found at other fund families. You sound like you are ok with sacrificing returns for peace of mind, so that may be more up your alley.

I've been thinking about trying some stocks again. I've had bad luck investing in green companies. This will be a good starting point for round two.

...in various religiously oriented magazines (American Buddhist, Unitarian Universalist, and Lutheran among them) and in magazines devoted to social justice and progressive ideals.

Sojourners has an article in its May 2008 issue about this, which I discovered by googling Socially Responsible Investing + Sojourners.

Hekate

Don't you know nuthin???

:rofl: oh god, i kill me!

When you figure decline of the dollar and inflation figures I believe you will find you are actually losing money with a savings account..If the goal is to lose money then there is nothing wrong with them...

in regular savings accounts. However, I have "online" savings accounts Citi, HSBC, and WAMU. They have a much higher rate of return than the national average. (currently I am getting around 3% on them, when I opened them I was getting over 5%) I have no money at all in the savings accounts that give you a .2% return. Which yes, I realize doesn't even keep up with inflation.

I don't like regular savings in general though even if I am getting a 3-5% return because the interest is compunded monthly rather than daily, so I have about 20% in CDs usually for 1 to 2 year terms.

I have some money in a Vanguard Wellington fund. I also have two more Vanguard funds in "safe" investments. My return on all of them this year has been very poor.

My 401K is in the RED this year. ALL of this year so far actually... this is mostly because the investment options are very poor. I expect it will eventually get out of the red again.... who knows when though.

I have lived paycheck to paycheck forever. So when the car breaks down or there is a large unexpected expense, I have had to charge so most of my disposable income has been used to pay off student loans and credit cards. Now I am only semi-out of the woods. I cannot afford to contribute to a 401k as my costs have gone up much faster than my income. Gas and electricity have increased way more than my 2.5% cost of living increase last year. So I am sort of stuck for the moment until I get a new job.

The greediest IN POWER OVER both our government and our media has succeeded in their mass brainwashing campaign that, every American citizen SHOULD OWN all that shit advertised on teevee,...that, EVERY AMERICAN (if hard-working and law-abiding) SHOULD HAVE every modern-day convenience, KNOWING FULL DAMN-WELL only a percentage could ever afford such things.

I call it MASS FRAUD!

While the mass majority of Americans WISH they could save while fulfilling their duty in that MASS FRAUD (conventionally called the "American Dream" but realistically a rainbow always pushed to keep the greediest wealthy and the most ignorant, frustrated), none I have ever known would call "saving", BAD. There may be those who did the "savings", investing in all you suggest, only to find those savings being far short of helpful in these economic times. Those people probably figure: "Screw it. I did everything right for a future with no reward,...now, I'll just live for today."

So, I figure,...between the MASS FRAUD re: "the American Dream" people are discovering and the absolute fact that life in the U.S.A. is totally uncertain, it's no surprise "savings" isn't at the top of priorities in America, anymore.

Nevertheless, characterizing the struggle of Americans with MASS FRAUD and UNCERTAINTY as being uncaring about savings,...is simply wrong.

Like you, I have lived paycheck to paycheck (almost) and drive an old car. I have sacrificed in order to put a bit (not nearly enough) aside out of my wages so that I can hopefully live independently in my senior years.

I am shocked, however, to note that you failed to mention the extraordinarily bad choice that savers have right now: It's either high risk "investments" in a stock market that appear at first glance to have risen in value but which have actually lost much more value due to the falling dollar, or, on the other hand, savings accounts that pay from 2.7 to 3.8% interest per year.

The shameful thing is that the banks are charging as much as 29.9% on certain credit card transactions while paying these pitiful interest rates to those who manage their money conscientiously. It's theft. Where are the banks putting all their loot?

And, you know what, I have very little sympathy for the banks when they cry about how they are losing money.

When you or I go into business for ourselves, regardless of the size of the business, we gain or lose money based on our management of our resources and our wisdom in calculating risks. If we, as independent businesspeople, extend credit to customers who are obviously bad risks, we lose money, and if we do it often enough, we have to close our business. That makes sense. That is how poorly run businesses are closed down. That is how the market economy is supposed to work. It irks me that the banks, who presumably support the market economy concept when it is to their advantage, want corporate socialism and hand-outs when it isn't.

The banks are supposed to be the most skilled and best equipped of all institutions, of all businesses, in calculating risks. Congress should be helping those of us who have saved and not the banks.

And I would like to add that many of us who are most affected by the greed of the banks, especially the low interest rates, are senior citizens.

I wonder what percentage of our banks is actually owned by foreign investors, including investors from the Middle East and China. I bet it is very high.

Thanks for your post. I've been harping on the low interest rates for some time now but don't get much support here on DU.

Edited to correct grammar.

You've captured the essence of this whole mess/crime very very well. Thank you for this post!

:applause: :applause: :applause:

and TRANSFER money from checking to savings

We have our new computers and we essentially bought them cash on sight

We needed the machines as ours were a tad old (one into year nine, the other year seven)

So I don't get it either

Saving money is a GREAT idea, but savings accounts are a really BAD idea.

The interest on many bank or credit union savings accounts is less than inflation, meaning the money in your savings account is actually losing value. My philosophy is to 1) keep enough money in a savings accounts to pay for 1 month's expenses, since savings accounts are extremely liquid; 2) put the maximum into my 401k (which my employer also matches 100% dollar for dollar, up to 6% of my income); 3) pay off my ONE credit card in full every month to avoid interest payments; 4) find SMART investments for any additional money I want to save - many investment vehicles pay more than inflation (money market accounts for example) and are still relatively safe; 5) keep close track of my credit score so that if do have an emergency and need funds, I know that they are available to me, and I can get a decent interest.

Other than stashing your money in your mattress, savings accounts are one of the worst investments out there. The math simply doesn't add up unless your bank happens to pay interest that is greater than the rate of inflation. That's a pretty rare thing.

According to Bankrate.com, damned few are paying even 4% these days, with many in the 3% range and lower. That's $40.00 per $1000 per year.

http://www.bankrate.com/brm/rate/mmmf_highratehome.asp?params=US,416&product=33

But I get a boost for being a long term customer who invests a large minimum amount in my account.

But you're right, it looks like even money market accounts are getting killed by the decrease in interest rates. Shit, there are banks paying in the mid 2% range, which isn't much better than a savings account, and significantly lower than the inflation rate. But, considering that my 401k lost 5% last year (after averaging about 15% gains over the previous ten years), the 2.5% doesn't look that bad - I guess it's all relative.

But you have to *start* saving with them. (Unless you are making huge wages every pay check)

For example, to open most Vanguard funds you need $3000. Until you reach that goal you have to save that money somewhere. Now once you reach that amount you are right - letting it sit in a regular savings account would be a mistake. Until you reach that amount however, I see nothing wrong with putting it in a regular savings account.

People do need to start saving first. Unfortunately, Americans have consumerism pounded into their heads from an early age while fiscal education is largely absent. Couple that with the disastrous economic models enacted under Reagan, and there are a lot of people who, even if they have the education, can not afford to put anything into savings.

This is one of the major issues that is completely essential to living life successfully yet not even mentioned in the educational system.

People who are so ignorant as to how money works and how to handle money responsibly often get themselves into financial disasters that take years to recover from. The sad thing is that most cases could have been prevented with some basic knowledge.

Oh, wait, I can.

:kick:
:thumbsup: :thumbsup: :thumbsup: :thumbsup: :thumbsup:

I could not agree more. I have a piddly little small savings account, but the calm and peace it gives me when something happens, like the refrigerator goes out, and I need money fast, cannot be beaten. Even if someone is poor, they can have somewhat of a savings account. The trick is to learn to live within your means by at least 10% and save the rest, and always make sure you don't have more going out than you have coming in.

Great post.