Do they just mean 'savings'? Or liquid cash? I can never find the actual text of the questions asked, and any clarifications on this point, although I see pop media references to these sorts of surveys regularly
Really? It's fairly common advice to store an emergency fund in something akin to a savings account (or at least something with FDIC backing). Either way, it seems bizarre for a high net worth individual not to have at least $500 in something extremely liquid like a checking/savings account.
Either way, it's fair to assume it means liquid cash, since the question is basically "could you afford an unexpected $500 expense?".
If you want to take that study to task, I think the far more interesting statistic is the 20% who would put it on their credit card: While those could be people who are just going into debt to afford the bill, it could also be people who just pay their card off in full every month and want whatever rewards they might be entitled to from using the credit card.
That’s where I have my emergency fund (earning nearly zero interest of course). If OP knows of some other type of account with enough liquidity to use as an emergency fund AND generates significant interest, you have my full attention!
Some banks, like Ally, also offer a "no penalty" CD, which has lower interest rates than a regular CD, but you can pull your money out at any time without paying a penalty, like you would on a regular CD.
Increased fed fund rates and tapering off QE has been having effects. Retail customers generally are unaware of this, so retail banks are still able to not pay any actual interest.
A lot of the weirdness in the market (from Tesla to GE and others) is due to increased returns from 'safe' investments causing easy money for risky ventures to start to dry up. Expect failures as companies built on nearly free money start having to pay up or fold. Some will survive, many won't.
how precarious is it? any thoughts/guesstimates on the percentage that will fail because of higher rates?
As to how many will fail is anyone's guess. Retail has already started to have a reaping (with help from Amazon). If a trade war kicks off price increases for goods from China, that probably won't help a lot of them.
Sub-prime auto market is not doing well either, that should hurt auto manufacturer numbers, but nothing crazy there at the moment.
I think everyone is still trying to guess.
If you can hold off on needing the funds for a year, then US I-Bonds can be purchased from TreasuryDirect. I-bond rates are adjusted semi-annually so they always yield more than inflation and currently at 2.52%. Treasury T-bills can be purchased in 4, 8, 13, 26, and 52-week terms. Current rate for 4-week bills is around 1.89%.
Obviously, this might not work as a single solution if your monthly expenses are much higher than mine, but it could still be a decent supplement.
I was asking specifically if the surveys mean actual "savings" account, which often have some restrictions on them ("Make a total of 6 transfers and withdrawals each monthly statement cycle with no Withdrawal Limit Fee"). If you're getting a grand total of 0.01% interest, there's not much reason to also restrict activity as well.
That said, I realize I do have a 'savings' account, via an online-only bank, getting about 50x what my local bank's savings account rate is. I just didn't think of it as a 'savings' account as I'm so accustomed to thinking of 'savings acct'='brick and mortar location'.
Given that the median American household has $1000/month in discretionary income -- money they can spend on beer or savings -- it wouldn't make sense that 60% of Americans don't have $500 to cover an emergency. Unless it was defined as cash in a "savings account", which most people (myself included) don't use.
Wages grew at the fast rate on record in 2015. [1] Nearby years are similar.
Here's FRED real median household income [2]. Real wages have been growing for several years.
[2] https://fred.stlouisfed.org/series/MEHOINUSA672N
[1] https://www.washingtonpost.com/news/wonk/wp/2016/09/13/the-m...
Real wages have been stagnant since the mid 60s. The short term picture is most likely a blip.
Most people working today were not working in the 1960s. They have seen their wages grow. Also as working demographics skew younger as boomers retire, the median worker is earlier in their career, so they earn less, making it look like wages are lower, yet for each person wages have increased. The higher paid cohort is retiring.
All this is covered in Census reports.
And again, most workers were not working 50 years ago. Many have seen real wage growth in their working lifetime.
You're still ignoring that there has been demographic changes also over the past 50 years. At the start of that many people didn't work, and were not counted in median wages. They were not looking for work and were not in the workforce. Since 1960 women and minorities entered the workforce in mass. Both of those groups have seen tremendous wage growth over the past 50 years.
So simply taking the median as you do, ignoring changes in the age and make up of the workforce, you miss a lot of gains.
You also ignore that total compensation, as measured by BLS stats, has increased far faster than wage growth. Currently wages only make up about 70% of total compensation [1]. Healthcare costs borne by employer are the simplest one to recognize - 50 years ago employers didn't pay much and costs were low. As healthcare costs increased, cost to employer increased far faster than wages, but this is still a benefit to the employee.
You also ignore that total cost to employ, again as measured by BLS has increased, due to regulations (many good) passing costs onto employer, things that also benefit workers. There has been significant federal legislation passed in the past 50 years that benefit workers, at a cost to employers. This cost results in benefits to workers but at a reduced wage.
BLS tracks all this in various indices.
So, if you simply look at median wage, ignore demographics, ignore increased benefits, ignore regulatory costs that benefit workers, then sure, things are not magically increasing. But all those other things are benefits to workers that do not show up in median wages. Adding them in gives a pretty big increase in total benefits to workers over the past 50 years.
So if you really want to argue more than I initially wrote, then let's do. But at least don't ignore factors counter to the narrative you want to spread.
You want to argue something else than what I posted.
60% of Americans can't afford a $500 unplanned expense [1]. That alone forces many to take crappy job(s) to just stay afloat.
[1] http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings...