For the past couple of years, there has been a ton of discussion about how Americans are not saving much money or at least not putting it aside. Even if individuals were to up the rate of savings, inflation rates have virtually made it a pointless exercise. How many times have you expected more information on tips to get a instant pay day loan, and turned to an online search on "payday loan
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Savings rate could be higher but there is a hitch
The number of people who are saving cash has dropped substantially in the past couple of years. There are fewer jobs left on the market and people are getting paid less. People who are working low-end jobs are just trying to feed their families and cannot afford to put cash into savings. These are just a couple reasons why savings have dropped.
About 41 percent of respondents saved less than $500, according to a survey by CreditDonkey.com. About 52 percent of Americans earned more than they spent, according to the Federal Reserve Survey of Consumer Finances, and it almost seems unnecessary to save anyway. Another 40 percent were actually saving money on a regular basis.
Not worth it to save for many
According to an essay of John Maynard Keynes on PBS, inflation was a tax that people would never comprehend. It is difficult on a number of people, and they do not even realize they are paying for it.
On the subject of a savings account, people are not making enough cash in interest to make up for inflation, according to Time Magazine. The rate of inflation is at 1.7 percent, the New York Times reported from the Consumer Costs Index. The Federal Reserve needs that the Federal Funds rate is around 0 percent, or the interest rate on short term loans from the Fed to banks. That means people are actually losing cash in their savings accounts.
How inflation is a tax is that as more money enters circulation, each dollar is worth a bit less since there are more of them. If a savings account is earning less interest than CPI inflation, the account holder is actually losing cash. As Time indicates, it therefore costs less to borrow money than it does to save money.
The best way to stay away from getting brought down by inflation with a savings account is to find one that yields more than inflation in the cost. NerdWallet came up with a lot of options for people planning to save more, according to the New York Times. There are 1,300 accounts that had interest rates above inflation, though 75 percent of those were at credit unions. You can go to Genuine Parts Credit Union and Aflac Federal Credit Union to get an interest rate over 2 percent.
There are investments you can make to beat inflation too, including ones where you own property, but owning a home is really never going to be a good investment with all the cash you have to put into it to keep it running. You can get stocks, bonds and other funds to work as long as they perform well, and certificates of deposits are never a bad idea.
Gold, according to MarketWatch, could be a hedge against inflation but only under certain conditions.
New York Times