The Federal Reserve is gradually raising interest rates, but they are still below historical norms. This means that those 25-basis points every few months or so are not adding up to much.
Simply put: you’re receiving pittance in your savings account.
Because of this, consumers are hoarding money in their checking accounts. According to Moebs Services, an economic-research firm, the average American consumer checking balance has swelled in 23 of the past 30 quarters. Today, the typical checking account balance is around $3,800, up from $1,000 in 2007.
Since 1991, the median amount in checking accounts has been $2,263.
But this may be a good sign for the economy, notes MarketWatch:
Of course, the most fortunate young Americans have been boasting about their $1 million 401(k) balances on social media before the most recent bout of market volatility began. But there’s a sizeable number who have seen a savings bump in recent years.
Nearly half (47%) of working millennials have $15,000 or more in savings and 16% have $100,000 or more in savings, according to Bank of America’s “Better Money Habits” report, which surveyed 2,000 millennials aged 23 to 37.
The bank asked about the total amount of savings, including bank savings/checking accounts, IRA, 401(k) and other retirement or investment accounts. A nine-year bull market has clearly helped. That’s an encouraging improvement for a generation saddled with record student loan debt.
The artificially low interest rates serve as a deterrent to saving and putting money into a savings account. Why bother when the rate of return is way below the rising cost of living?
You can’t blame people for hoarding cash in their checking account.
Is the glass half empty or half full? Since 1991, the median amount in checking accounts has been $2,263. Also, you would need $4,195 in your checking account to equal the buying power of $2,263 1991. So, $3,800 is not anything great.
Record debt for most families is not going to be offset by a few thousand dollars in a checking account. Until we teach everyone that debt for anything but a house or car is BAD, nothing will change.