The state of our economy may not have people hiding money in mattresses, but it certainly has them putting a majority of their monthly funds into basic savings accounts.
According to budgeting website BillShrink, which aggregates data from its user base, the average dollar amount Americans say they have in savings is $57,735. Additionally, the average amount BillShrink users say they intend to save each month is $543.
“A lot more people are holding on to their cash,” Schwark Satyavolu, CEO of BillShrink, tells MainStreet. “People are scared about the future of the economy. They feel the need to have a rainy-day fund.”
While a certain amount of trepidation is understandable, there are disadvantages to squirreling away all of your money in a bank vault. Generally speaking, Satyavolu says, consumers get a rate of 0.5% to 1% on a basic savings account, a sad side effect of the bad economy most people electing to bank their money already understand.
What they fail to consider, however, is inflation, the rise in prices of goods and services in an economy over time. The inflation rate in the U.S. rests at 1.1%, down significantly from the 2.6% rate this year and a long-term high of 3%.
Once you also deduct the money you pay on your earnings in taxes each year, even those on the high end of the interest rate scale will be below the rate of inflation. This means you can’t expect to make money off of your savings account. In fact, Schwark points out, thanks to inflation, your money is going to be worth less six months to a year from now.