Due to persistent inflation, the Federal Reserve has increased interest rates in the past year, leading to the highest returns on savings in 15 years. This means that not only is borrowing becoming more expensive, but savers are also able to earn more on their bank deposits.
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Top-yielding online savings account rates are now nearing 5%, the highest since 2008, and much higher than last year’s 0.8%.
Even Apple started offering savings accounts with a 4.15% interest rate.
So if we take the average of 5% on your savings, with a $10,000 balance, that’s $500 you could be earning right now.
With this said, while savers could get better returns on their cash, just 22% of savers are earning 3% or more on their accounts — and nearly as many savers are not earning any interest at all, according to a report from Bankrate.
According to a survey, the primary reasons why most individuals did not switch to a high-yield savings account were because they favored their local bank or were content with their current banking institution. Additionally, some individuals expressed concerns regarding the security of their money at an online bank, while others felt that they did not have sufficient savings to warrant a switch to a high-yield savings account.
49% have less in savings, or none, compared to 2022
Americans, overall, are saving less. Nearly half, or 49%, of adults have less savings or no savings compared to a year ago, according to a separate Bankrate survey from February.
The highest amount of credit card debt exceeding emergency savings has been recorded, with over one-third of people falling into this category. This is a concerning trend, as it means that people are relying on credit cards to cover unexpected expenses rather than having a safety net of emergency savings.
This situation has been exacerbated by the high inflation rates that have been experienced recently. Inflation has had a negative impact on people’s savings, reducing the value of their money over time. As a result, households have been struggling to keep up with the rising cost of living, and many have had to dip into their savings to make ends meet.
This has left many people in a precarious financial situation, with little or no savings to fall back on in case of an emergency. It’s important for individuals to take steps to build up their emergency savings, even if it means making sacrifices in other areas of their budget. This can provide peace of mind and financial security in case of unexpected expenses or job loss.
4.5% of households are unbanked entirely
And then there are those who don’t save at all, at least at a bank or credit union.
In 2022, 4.5% of households had no checking or savings account, according to the FDIC’s latest survey.
Many people who do not have bank accounts listed not having enough funds to meet the minimum balance requirements and a lack of trust in banks as their primary reasons.
The fear of account fees also played a significant role in this decision. However, being unbanked means missing out on benefits such as savings rates and credit building opportunities. Online payment services like PayPal and Venmo can help with day-to-day transactions, but they cannot replace the benefits of being part of the banking system.
The absence of a bank account can have a long-term impact on one’s financial health, potentially leading to missed opportunities for savings and reduced access to credit.
