|Women trail men in saving
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Interest earnings improved
Emergency funds are starting to earn more interest,
but nearly half of the accounts aren't even keeping
pace with inflation. This year 56 percent of respondents
earn 3 percent or more on their savings, compared
with only 44 percent last year. Unfortunately that
means nearly half of the accounts are in effect losing
purchasing power, since historically 3 percent is
the minimum rate to keep pace with inflation.
Again, women lag in this area. Only
49 percent of women earn 3 percent interest or higher
while 61 percent of men do. Women are also much more
likely than men not to know the amount of interest
they are earning, with 19 percent of women unsure
compared with 8 percent of men.
While it seems that at least some savers are becoming savvier, there's still a long way to go. Experts agree that interest is one area people can't afford to overlook.
Chatzky calls low returns on savings a common problem. "These folks could likely double the money they are earning on their money either by moving it to a more competitive account or by asking their own bank if they have a product that offers a higher rate of interest.
"It's a move that takes less than an hour and can pay off substantially over years to come," she adds.
Everyone should earn at least 4.5 percent
to 5 percent by saving in a high-yield money market
account, says Epperson. "They're FDIC-insured,
so they're completely safe. There's no reason not
to have it," she says.
Bankrate Senior Financial Analyst Greg
McBride attributes low interest holdings to the power
of inertia. "Leaving money in a no-interest checking
account is tempting if you're focusing on other things,
but there's no need for that cash to sit idle. It
can earn a competitive rate of return and still be
available for unplanned expenses."
It seems that 25- to 34-year-olds are
getting the message. They are most likely to earn
a return that outpaces inflation and are the least
likely to be earning no interest, points out McBride.
"I think part of that is explained
by the 25- to 34-year-old set being an Internet-savvy
group and there's a greater likelihood that they've
shopped around or been exposed to the high-yield
savings and money market accounts available via
the Internet. This means that they are more likely
to make sure their savings is earning an adequate
return instead of languishing in a low- or no-interest