When the market crashed in 2007, the stock market followed directly behind. Unfortunately, there wasn’t much advance warning that fallout was on the horizon before it was too late. Thousands of people lost hundreds of thousands of dollars they had believed was “in the bank”. Retirement funds disappeared and self-made millionaires were starting from near to square one. Today, in the wake of a still-shaky economy, many Americans are looking for a cash safe house, and savings accounts seem to fit the bill. The only problem is that savings accounts really haven’t changed with the times, and it makes them a less than desirable option for many consumers looking to rebuild lost fortunes quickly.
Stable, but low-yield
Savings accounts have always been a relatively low yield investment. Most interest rates (even in the best financial market conditions) do not eclipse three percent annually. Investors used to making upwards of eight percent sneer at such low rates of return –and rightfully so. It is clear that the old way of saving needs a financial overhaul.
The pluses
Savings accounts linked to consumer checking accounts offer stability, the capability of moving money from one account to the next instantaneously and having an emergency fund liquidated and ready to use at a moment’s notice. However, with the strides made by market accounts carrying higher rates of return and the same portability, the run-of-the-mill savings account remains a choice that is a distant second for many consumers. In fact, financial experts still recommend money market accounts for the bulk of a consumer’s savings, and tell consumers to keep a minimal amount in a traditional savings account.
CD’s are still viable
Certificates of Deposit are a viable and high-yield option still today. Upon review, some financial experts recommend them in lieu of a traditional low-yield savings account, even though they come with a fee should a consumer need to withdraw the balance before the maturation date.
The financial times have changed. More consumers are educated about money (and what to do with it) than ever before. Because banks rely heavily on money stored in their warehouses using savings account balances to obtain and issue credit, banks will need to diversify and overhaul the old fashioned ways to save if they want to attract consumers from investments of gold, silver, stocks, bonds and mutual funds. If they fail to do this, the traditional savings account set up as we know it could become a dinosaur over the next twenty years and be on the verge of extinction.