Current Events > What's the point of a savings account in a bank?

(+) Yeah! (+)

I'm staring at this $2000 I have had since college in my "inactive" bank savings account... It's probably earned me $2 a year or something stupid

Why shouldn't I put all of this in a diversified stock portfolio?

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I agree. I used to have a savings account but I closed it and moved everything over to my checking account
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I use it for saving up for home improvement projects, vacations and a new car fund whenever I need to buy one (hopefully no time soon).

Also always good to have a safety cushion for when you hit a rough patch.

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So the bank has money to lend to other people so they can make money... duh

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Rainy day fund + easy liquid funds

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Hexenherz posted...

I use it for saving up for home improvement projects, vacations and a new car fund whenever I need to buy one (hopefully no time soon).

Also always good to have a safety cushion for when you hit a rough patch.

But why keep it in the savings account specifically? I keep a cushion in my checking account already

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The savings account is good if you get hacked or something and they take from your checking.
So that way your savings got the bulk of your money.

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Coloradough posted...

But why keep it in the savings account specifically? I keep a cushion in my checking account already

idk, just a slightly higher interest rate, plus I'm bad at visualizing compartmentalized savings in one account so having a second account helps differentiate between my checking money that I use to cover credit card balances and transfer over to investment accounts, and then... a general savings one for other stuff.

Also it did save my ass when I got kidnapped and robbed at gunpoint. I had just received my enlistment bonus but it was all in my savings account. They asked me how much money I had in the bank, I said I had $300, and they only checked the checking account and that was accurate... >_>

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DoubleDare posted...

The savings account is good if you get hacked or something and they take from your checking.

This. Don't keep any more than "fuckoff" money in checking, especially if you have a debit card tied to it.

I usually keep the bulk of my funds in savings. I've had my card number stolen before.

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So the answers are:

- if you're bad with money
- so the bank can borrow against you
- in case you're kidnapped

Yeah I'm gonna go buy stocks

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saving accounts have been a poor trap for decades, unfortunately.

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KStateKing17 posted...

I usually keep the bulk of my funds in savings. I've had my card number stolen before.

Doesn't the bank just refund you what was stolen?

That's what they did for me last time

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PatrickMahomes posted...

Rainy day fund + easy liquid funds

Questionmarktarius posted...

Don't keep any more than "fuckoff" money in checking

These basically. Other than my 401k, I use a HYSA for the bulk of my savings to get slightly more interest in a semi-liquid state, a normal savings to hold some emergency quick cash, then my checking holds just enough to pay bills and random purchases.

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Whether or not you should buy stock with the money is irrelevant to the checking account vs savings account question isn't it?

If you have enough money quickly accessible in either kind of account you should invest the excess.

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Hexenherz posted...

when I got kidnapped and robbed at gunpoint

WTF

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bluezero posted...

WTF

lol yeah man I was about to shit myself the first minute or two, it was intense.

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Balrog0 posted...

Whether or not you should buy stock with the money is irrelevant to the checking account vs savings account question isn't it?

Well the typical answer I see from googling this question is "the savings acct makes you money!"

But an index fund makes you 5% a year and a savings account makes you 0.01% so surely there is another benefit?

Sounds like there's not though

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Coloradough posted...

So the answers are:

- if you're bad with money
- so the bank can borrow against you
- in case you're kidnapped

Yeah I'm gonna go buy stocks

this is the revelation that led to me getting into stocks like amd and sq in 2016 and 2017 instead of being happy with my 2% savings account and 4% cd

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Liquidity
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Stocks are great, don't get me wrong. I put a lot of money into buying them myself.

But say you need to have some cash urgently... if your portfolio's down at all then you're taking a loss just to tap into that savings. That's my logic behind saving a little bit every month (and investing more than a little bit every month).

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i'm old enough to remember savings accounts paying 3-5% interest rates. that was the appeal. decent return, but liquid. since the rates tanked over the last few decades, and the stock markets have become infinitely more accessible over the last one, there really isn't any point to a savings account anymore. all you're doing by using one is letting someone else make the profit on your money.

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Coloradough posted...

But an index fund makes you 5% a year and a savings account makes you 0.01% so surely there is another benefit?

A FDIC-insured savings account is about the "safest" place for money, but that's about it.
If you think you can do better investing in stocks, go right ahead. Just don't invest any more than you're willing to lose.

I've lost track of how many people I know with this sentiment who end up hit with massive interest fees because an emergency came around and everything they had was tied up in the market

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BignutzisBack posted...

I've lost track of how many people I know with this sentiment who end up hit with massive interest fees because an emergency came around and everything they had was tied up in the market

I have enough liquid for over a year, I'm only wondering why people put that money in a somewhat locked account that in essence has zero return

I think the answer is most people are bad with money

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PatrickMahomes posted...

Rainy day fund + easy liquid funds

KStateKing17 posted...

I usually keep the bulk of my funds in savings. I've had my card number stolen before.

both of these reasons.

when money is invested it's not immediately accessible because you need to liquidate whatever stocks/investments it was tied up in AND THEN you have to worry about the taxes/etc for selling an investment. i have my 'emergency fund' in a savings account so i can access the money without delay or inconvenience. this is typically ~6months of expenses plus whatever surplus savings i have that has not been invested yet.

i also keep a minimal amount in my checking because i have that account tied to electronic debits for paying bills. not long ago something happened to my father where folks hacked his insurance company and used that account to drain his checking account of $20,000 over a few days in $5 debits.

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I keep about 2500 always in my Chase checking. I always use my Chase Freedom credit card for the points back. I keep the rest of my money in a Credit Union Savings Account.

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Coloradough posted...

I think the answer is most people are bad with money

Well, yeah, but what does that have to do with savings accounts?

I always have 5000$ in savings case of emergencies. Stocks take time to sell and put into your account, plus you have to pay taxes on them when you sell them

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The ones that say they have a savings account because they are bad with money, they only have one because they like the idea of having "two" accounts rather than one. Nothing more than a a mental barrier. Not really any use for the second account.
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Questionmarktarius posted...

Well, yeah, but what does that have to do with savings accounts?

It sounds like having a separate less accessible account is the only benefit of a savings account. Because people who are bad with money will completely drain an easily accessed account, rather than just stopping at X dollars

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Ideally you should have a savings account for emergencies, your 401k for the future, and THEN an alternative investment portfolio.

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TheHoldSteady posted...

plus you have to pay taxes on them when you sell them

I don't really see this side of the argument... You've made money, you win either way


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I mean if having a savings account helps people over using their money then more power to them. There's no shame to use a savings account for this and I dunno why some of yall would try to shame people for this LMAO.

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I'm not saying I'm bad at money but it is easier to manage two different accounts rather than operate off a single balance (in my opinion).

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Coloradough posted...

It sounds like having a separate less accessible account is the only benefit of a savings account.

It's pretty trivial to move money between accounts, at least when they're with the same bank.
The point is to make it less easy for someone else to access.

Coloradough posted...

Well the typical answer I see from googling this question is "the savings acct makes you money!"

But an index fund makes you 5% a year and a savings account makes you 0.01% so surely there is another benefit?

Sounds like there's not though

Yeah, but you're talking about more than one comparison and conflating them.

A savings account is better than some kind of investment for emergency needs because it's more readily available.

A savings account is also better than a checking account for emergency needs because it's generally more secure.

It's about managing risk in both cases, but they're different trade-offs.

I recently had to cancel my debit card because I saw an unrecognized transaction in my checking account.

It's not a big deal... Except when it is. Like giant aspirins example. I mean it's not a big probability event but what's the downside of the savings account? It's not the rate of return if you compare it to a checking account

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Coloradough posted...

I don't really see this side of the argument... You've made money, you win either way

because if I'm in a situation where I need to access my emergency funds I don't want to have to worry about paying extra money I don't have?

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My mum always says that banks are just licenced and legalised loan sharks. They give u shitty interest rates but when you have to get a loan or mortgate from them, you end up paying back like 150%.


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TheHoldSteady posted...

Coloradough posted...

I don't really see this side of the argument... You've made money, you win either way

because if I'm in a situation where I need to access my emergency funds I don't want to have to worry about paying extra money I don't have?

You do have the money though... you just sold. And the tax isn't "due" until you file taxes.
Advice is usually to set aside whatever gains you made by what your tax rate should be if you want to make sure you have the money available to pay
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TheHoldSteady posted...

because if I'm in a situation where I need to access my emergency funds I don't want to have to worry about paying extra money I don't have?

But...

You invest 2000

It becomes 4000

You need 1000

You sell 1500

You still have 2500

You made money. If it's in the bank you just straight up lose 1000

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Balrog0 posted...

Yeah, but you're talking about more than one comparison and conflating them.

A savings account is better than some kind of investment for emergency needs because it's more readily available.

A savings account is also better than a checking account for emergency needs because it's generally more secure.

It's about managing risk in both cases, but they're different trade-offs.

I recently had to cancel my debit card because I saw an unrecognized transaction in my checking account.

It's not a big deal... Except when it is. Like giant aspirins example. I mean it's not a big probability event but what's the downside of the savings account? It's not the rate of return if you compare it to a checking account

Ah ok this makes sense. I guess I personally just don't feel like I need this. I was assuming I was missing something, but I'm fine with my level of security. If others need more, I get that

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emblem boy posted...

You do have the money though... you just sold. And the tax isn't "due" until you file taxes.
Advice is usually to set aside whatever gains you made by what your tax rate should be if you want to make sure you have the money available to pay

I'm talking about strictly putting an emergency fund in stocks

Taxes are a form of debt

By putting emergency funds in stocks you're essentially creating more debt and if the economy tanks your emergency funds go with it

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Coloradough posted...

But an index fund makes you 5% a year and a savings account makes you 0.01%

My savings account was at 2% a year or two ago, for what that's worth

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Antifar posted...

My savings account was at 2% a year or two ago, for what that's worth

I actually fudged the numbers -- s&p500 averages 10% return

Damn though what bank do you use? I think mine is literally 1/10th of 1% return

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Coloradough posted...

Doesn't the bank just refund you what was stolen?

That's what they did for me last time

Yeah, but it's a hassle to wait for another card and having to call all your utility companies to hold off on bills.

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Coloradough posted...

I actually fudged the numbers -- s&p500 averages 10% return

Damn though what bank do you use? I think mine is literally 1/10th of 1% return

Ally. It's gone down since, but it's still 0.5%

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Conflict posted...

Most people don't know how other accounts work and it's not considered common knowledge, idk why this would be at all surprising to you.

I mean, most people don't have any sort of savings period so...

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I use a credit union, so they pay out based on how profitable they are. It hasn't been good this year

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