Re:Survey: 69% of Americans Have Less Than $1,000 in Savings
by brianwawok on Sunday October 16, 2016 @08:32AM
(#12718317)
I don't care what kind of plan B you have, having $500 or $1000 cash seems like common sense. What is the opportunity cost of $1000 not in the stock market... $50 a year?
Re:Survey: 69% of Americans Have Less Than $1,000 in Savings
by rdm42116 on Sunday October 16, 2016 @10:40AM
(#12718784)
Yes, that comment was ridiculously out of touch.
That's fantastic you have a safety net with your parents, with amazing credit, that can borrow at good rates, at any time.
What about the people paying double digit interest rates to get a crappy used car? People who can't borrow money because of no credit, without their parents to cover extreme interest rates?
It's great that some people have the luxury to somehow not have an emergency fund, but a huge portion of the population is unable to do that. The last thing they care about is return on investment in savings-they need money to get food next week.
For example, in my financial situation, I would borrow to cover an unexpected $400 expanse. However, that is because I have a prior agreement with my parents that they would loan me (at 0% interest) to cover unexpected expenses, so I have no reason to keep a surplus of money fully liquid when it could be earning better returns elsewhere.
My parents, for their part, base their savings on the assumption that they would cover unexpected expanses from their line of credit secured against their house. This, again, is not because they do not have the money to set aside for emergencies, but because they think that the opportunity cost of keeping the money liquid outweighs the cost of occasionally paying on credit. As it happens, they could pay for a $400 emergency out of pocket, but that is mostly because they are too rich to micromanage at the $400 dollar level.
With respect to retirement savings, I do not think that stat is as bad as it first appears (although I do think the typical American is underrepresented for retirement). The basic financial story is:
1) take on debt for big, lifetime purchases (education and a house).
2) Pay of debt
3) Accumulate wealth
4) Retire and live off of accumulated wealth
Given this, it is not unreasonable that young people would have no money set aside for retirement, because it might be more efficient to use that money to pay off debt.