Do you remember heading to the local bank and opening your very first savings account? Maybe you had saved up a few hundred dollars mowing lawns over summer vacation, or had even earned your very first paycheck. The sense of accomplishment and independence that comes from becoming a first-time account holder is hard to beat. Unfortunately, 17 million Americans have no idea what that feels like.
Today, the Federal Deposit Insurance Corporation (FDIC) released the results of its 2011 National Survey of Unbanked and Underbanked Households. The study examined how many U.S. citizens are either underbanked, meaning they have inadequate access to mainstream banking products, or are unbanked — owning no bank accounts at all.
At first glance, the string of statistics released by the FDIC hardly inspires a strong reaction. The number of underbanked and unbanked U.S. households has remained relatively flat since 2009, with a slight increase of 0.6 percent. However, the number that truly stands out — and is, quite frankly, alarming — is the fact that three in ten households don’t have a savings account. Thirty percent of the country believes they don’t need one, which in my opinion, is just dumb.
Why Do So Many People Choose to Remain Unbanked?
Okay, perhaps “dumb” is an unfair generalization. I’m guessing that the majority of people who don’t take advantage of savings accounts are simply lacking some important knowledge when it comes to understanding and using these tools. In fact, there are probably a number of rationalizations for why someone would believe they’re better off stuffing their cash under the mattress:
Banks are evil and will steal my money. Ever since the Occupy Wall Street movement, the general population has been especially distrustful of big banks. That’s fine if you are, too. By now you should be aware that there are a multitude of local banks and credit unions throughout the country that will gladly offer you a high-yield savings account with no fees and awesome customer service. Here’s how to switch banks.
Do you not remember the financial crisis? I don’t want to lose my savings. A lot of money was put at risk when major financial institutions went under as a result of the financial crisis that began in 2007. Luckily, the FDIC is here to insure deposits up to $250,000. Credit union members are protected by the NCUA for up to $250,000 as well. Unless you have more than a quarter of a million dollars saved up, there’s no reason to fear your savings could be lost in another banking meltdown.
I have no money, so I can’t really save any. If you haven’t saved any money at all, then you have bigger problems than being unbanked. I know it’s tough to save when you’re living paycheck-to-paycheck, but setting aside even $20 a month means you’ll have some sort of safety net if a big expense pops up in the future.
With interest rates under 1%, why bother? Yes, savings account rates are pretty terrible right now — but would you rather earn something, or nothing?
Benefits of a Savings Account
So now that there are no more excuses available, here are a few of the advantages to using a savings account:
- Keep your cash safe: As mentioned, money deposited in a federally-insured bank or credit union is protected by the government. Plus, you can’t lose it.
- Develop a good habit: When you get a fistful of cash every payday, it’s often too temping to spend rather than save. By keeping your money in “electronic” form, you’re eliminating some of that temptation and making it easier to transfer funds directly to your savings.
- Fight inflation: Inflation, put simply, makes money worth less. If your savings isn’t growing at the same rate as inflation, you’re essentially losing money.
I think we can all agree that saving money is not as enjoyable as spending it. But guess what? Like eating vegetables, going to the gym and brushing our teeth, doing the things that are good for us is rarely fun.
You don’t have to sign your life away to an evil national bank — with the multitude of online institutions, community banks and non-profit credit unions, there’s probably a spectacular savings option available in your neighborhood. If you are a part of the nation’s 30 percent who still don’t have savings account, do yourself a favor and start putting a little money away. I guarantee you’ll thank yourself in the future.