A Savings Surge: Is the Mattress the Right Place for Your Money?
by Efin Advisor | March 27, 2009
American consumers and businesses are embarking on a new era of thrift, saving more money than ever before. Should you be concerned about safety? A homespun urban myth quips that a mattress may be a better vault for those savings than a neighborhood bank.
Fortunately, for your wealth and your health, there’s no need to lose sleep or make your mattress uncomfortable. The Federal Deposit Insurance Corporation (FDIC) insures all funds on deposit with affiliated financial institutions up to $250,000 per depositor. A good thing, too, since the U.S. personal saving rate in the last three months of 2008 rose to its highest level in six years.
“If American consumers are less indebted, live within their means and have more money in savings, they are better positioned to spend on a sustainable basis for years to come,” said Greg McBride, senior financial analyst at Bankrate.com. “As painful as that is economically in the short run, these developments will better serve us in the long run.”
The gains in personal savings have come even as interest rates drop to negligible levels. According to a weekly Bankrate.com survey, the average one-year certificate of deposit paid 1.63 percent interest, while average money-market accounts paid 0.54 percent interest.
“Consumers are rational,” said Joshua Shapiro, chief United States economist at MFR. “They respond to incentives and conditions, and right now the conditions and incentives are: spend as little as you can, and pay down as much as you can. You hunker down. That’s what the consumer’s doing.”
Besides passbook savings, money market accounts, certificates of deposit, and the mattress, innovative insurance products are another way to save money and build substantial cash equity while putting those dollars to work by protecting against financial disaster. How are your savings plans shaping up?
I hear it’s a good idea to keep a little cash around the house — maybe $2,000 or so — just in case there is a disruption with my local bank. Still, I wouldn’t keep more money than that around. It’s unsafe. Paper can burn, be lost, removed or worse.
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FDIC! Isn’t education amazing? The lack of education can be so costly. NOBODY has lost money in an FDIC insured bank since its inception according to Warren Buffett. There is no risk in keeping your money in a bank…period. We have to be educated. Bottom line.
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I am super glad that I have decided to save the majority of my money, instead of investing it. I knew going in that it would accrue wealth more slowly, but that it would be safer. A big issue for me is financial security, but I wonder how the changing interest rates and inflation affect my money. Even though it is guaranteed by the government, who is guaranteeing the value of the dollar?
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What is to stop the FDIC from declaring bankruptcy and suddenly not guaranteeing money anymore? Isn’t that what happened during the great depression- banks didn’t have enough currency to cover people’s money, when they went to withdraw from savings, they could not. I am very worried that the same will happen here.
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Can I count money I have invested in life insurance as part of my savings? I don’t have direct access to it, but it is still technically mine. I bought a policy a while ago, but don’t really understand it. Are there any resources I can easily find to help me understand the workings of my insurance policy as a savings mechanism?
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I am finding it harder and harder to live within my means as prices rise without my salary rising. Things which used to be staples are now practically luxury items, if prices keep rising, I do not know what I will do. Does anyone have suggestions about good ways to save money. I have already done things like, turn down my heat, and monitor electrical appliances. I don’t buy expensive coffee, and I am re-using what I can. Any help would be great, thanks!
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I always keep a little cash on hand just in case my card doesn’t work or the power is out around town. I don’t think I would turn my mattress into a savings account, though.
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