Most Americans don't have enough money in reserve for 5% interest on their bank balance to make much of a difference†. If you're living paycheck to paycheck then you spend all of your money before it has a chance to accumulate any interest. I obviously don't know the financial situation of the store clerk you were talking to. But if you are trying to get typical American retail workers excited about 5% interest, you are probably a bit disconnected from the financial reality of their lives.
I’ve lived paycheck to paycheck and I definitely still had a few dollars to get the ball rolling after each paycheck. Claiming that you can’t is exactly the defeatist attitude that will keep you financially disabled.
People with less than $500 can still start gaining that 5% yield, and it is better than the bank taking that 5% and eating it. If you don’t get that 5%, the bank will. Furthermore most people can easily calculate 5% and make the decision themselves if you don’t actively discourage them as your reply suggests.
From the article you linked:
> This leaves them vulnerable to unexpected expenses, underscoring the importance of having an emergency fund, if they’re able to build one.
The rest of the article goes on how to vet yourself to start building an emergency fund. A great emergency fund would be a very liquid, low tax, investment option. Like cash equivalent Bonds and ETFs.
If someone has a bank account with $1 it would still be better in a Fidelity Cash Management account gaining a yield than it would be in a bank not gaining at all.
> I’ve lived paycheck to paycheck and I definitely still had a few dollars to get the ball rolling after each paycheck. Claiming that you can’t is exactly the defeatist attitude that will keep you financially disabled.
2010s were a decade of paycheck to paycheck years for me+kids. We frequently ate plain white rice (only) because there wasn't enough money for a can of beans. Or 1 onion. Sometimes I couldn't swing a bag of rice. The kids had a couple of regular meals when school was in session.
I suggest your circumstances aren't as universal as they may seem to you.
And you didn’t have a bank account with money in it? Did you cash your paychecks at a check cashing service (giving them a cut?) and spend all the cash? What were your expenses during that time that ate all your paycheck? Surely not just rice.
That comment was directed at the previous poster’s remark than since 60% of Americans have $500 or less in their bank account that must mean all 60% have no money to save and that my advice was bad. That is the defeatist attitude. I’m definitely not insisting that some portion aren’t entirely living paycheck to paycheck.
The point of my comments is to acknowledge that people should seek out return for their money instead of keeping it in a bank. Not to squabble over who is worse off.
> And you didn’t have a bank account with money in it?
I had a bank account. Each month it eventually came to have the exact amount of the rent in it. Most months, anyway.
> Did you cash your paychecks at a check cashing service...
On a few occasions where utilities would be cut off in less than a day, I used a check cashing service. Specifically Ace as their fee was lowest.
> (giving them a cut?) and spend all the cash?
On those occasions I blew it on water or power.
> What were your expenses during that time that ate all your paycheck. Surely not just rice.
Not just rice, true. My expenses were rent, water, power, fuel and minimal auto insurance (until the van was stolen anyway). Water and power outweighed food because disconnected utilities were CPS threat vectors.
> The point of my comments is to acknowledge that people should seek out return for their money instead of keeping it in a bank.
For those that make more than 100% of their minimal bills sure. For the millions of us who had to live otherwise, keeping non-existent money in a bank seems unrealistic.
Sure that is a much larger issue about wage stagnation than it is about ability to save then. It sounds like you were trying to do more than the minimum when it came to keeping money.
If you maintain a $1000 average bank balance (which is at the higher end of ‘paycheck to paycheck’) then 5% interest is $50/year. It’s worth having, but people aren’t going to put time and effort into getting it when they have bigger problems to worry about.
Why not? It takes maybe a week to set up? And most of that week would be waiting for a funds transfer. It costs $0 to open and you get atm fee reimbursement and no international transaction fees. I get that people are busy but if you’re unhappy about something and you can change it, then why not carve out time to do so. People have plenty of time to seek new employment, this is just as critical.
You’re just raging at people at this point. Most people don’t optimize their finances to that extent. Sorry. An extra $50 a year (in the most optimistic case) is not going to protect anyone against inflation, as you were originally suggesting.
How am I raging? I’m passively telling people ways to better their lives. They can choose to use the info or not. You are the one raging against the idea of a better world with happier people. An extra $50 certainly does help people living paycheck to paycheck. The point of my commentary is that people should be optimizing their finances more and we should be discussing options publicly. Your insistence that it’s futile is mind bogglingly stupid.
It's not futile to try to get interest on a tiny bank balance and I explicitly said that it's not futile. (I said that the hypothetical $50 was 'worth having'.) The thing is that
people on low wages already have to think about money all the time. They will be reluctant to spend even more time thinking about it unless there's likely to be a big payoff. I think you are vastly overestimating how much money a typical American has lying around that has the potential to collect interest.
Also, the current interest rate on a Fidelity cash management account appears to be around 2.2%, not 5%.
Well then you would appear to be wrong because buying SGOV, and FDLXX (cash equivalent bonds that track tbills) will give you closer to 5.0% (creating a high yield checking account for daily use). What you are quoting is an APY on a deposit sweep. There are clearly two options to get any % back.[0]
Even if you foolish choose the 2.2% option you would still yield more return on your money than a bank checking account which probably gives you less than 0.01% return.
You can optimize further by cutting Fidelity out of the equation and purchase Tbills on treasurydirect.gov straight from the government creating a high yield savings account with monthly yield.
Even better, Tbills are tax-free at the state and local level.
†https://www.cnbc.com/2024/01/24/how-much-money-americans-hav...