Given my savings account pays 0.01%, and a 30 day CD from my bank pays .75%, and the average dividend yield of the S&P 500 ETFs (like blackrock's IVV) net-of-fees is 2%, is it all surprising that nobody uses Savings Accounts anymore? Seems like rational behavior to me.
Nevertheless it seems like a flaw in the study if it's not counting other liquid sources of cash, such as checking accounts, brokerage accounts, cash itself, etc.
This response comes up every single time this statistic gets posted. I assure you that your condition is not typical for the 69% mentioned in the statistic quoted.
"The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?"
Fair enough - but, given the fascination a lot of people have with owning their home (which I do not), you would also have to include any positive equity (which can be leveraged in a number of ways) in their property in this scenario.
I guess the question I would have is "What is the 10th/25th/Median percentile of net-liquidity" and "What is the expected downstream third-party income from Social Security/Pensions/etc..." expected. That paints a fuller picture of people's financial stability, and also identifies how important Social Security is to their wellbeing.
Thanks for that retirement savings link; been looking for that data.
Yeah, forget the saving account. Retirement is going to be the real issue. Lot of people going to be eating dog food in the future.
Pensions for anyone under 45 are pretty much non existent, with a few exceptions. Even if they are, the companies tend to screw with them. Our company just froze the salary for pension calculations (not that I have one), so somebody could work another 20 years and retire at a percentage of today's pay.
At least I get a crappy annuity and 401k matching. New hires now get neither.
You get at least something from social security, which every worker pays to sustain, and society then promises to keep going. (Worker/retiree ratio changes are going to be a problem.) Thus, retirement savings is not the top problem.
However, the truth is that a majority of Americans worry about how to pay food and rent every month. This is not because they are all irresponsible human beings, but because American society makes it really freaking terrible to be in the bottom half. Retirement is out of reach; saving for an emergency has to fight with rent has to fight with prescription medications has to fight with clothes for your kids.
On the other hand, I know a few Americans who have more than that in cash in their wallet, and although they are probably not average, they are not what I'd describe as wealthy either.
While I don't doubt this, the chance they are in the upper sector is pretty high especially with the wealth concentration being in the top few % (from my understanding).
I feel the descriptor of middle class has moved away from X% disposable income and that you are describing a 'traditional' middle class. I do not live in the US however and could be tainted by my personal experience in AUS.
It's both -- but not because it's "convenient" but because it's the only possible source. The minimum payment will then multiply the cost over many years.
I agree with the conclusion, but do not think you can get their just by looking at how people would pay for a $400 emergency.
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.
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?
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.
This just tells you there are a hell of a lot of stupid people out there. In no reality are 47% of Americans in the position of not being able to save $400 due to external circumstances.
Ally pays 1% interest for their free online savings accounts. I wouldn't be surprised if other online banks are offering even more; haven't checked in a while. (Oddly, looking at Ally's CD offerings, some of the shorter-term ones are <1%...wonder what value those could possibly offer vs. their savings account.)
Somewhat tangentially, it always surprises me that people continue to use checking/savings accounts from banks like Chase, Wells Fargo, Bank of America, etc. when they pay terrible interest rates, don't reimburse ATM fees, and sometimes actually charge you for debit cards and/or paper checks. If it's the thought of not having access to real brick & mortar banks that scares you, Schwab is a great option (though they pay much less interest than the top online ones).
As far as I know, the only bank to offer a higher interest rate (for the entire balance--as opposed to the first X amount) is GS Bank at 1.05%. But I haven't seen anything higher.
Er, could you explain why? The Wikipedia articles you link to seem to very much make the case in the opposite direction... There doesn't seem to be anything damning in the Ally entry. Especially compared with the Wells Fargo entry, which includes a detailed 14 point list of "Controversies" (including the recent scandal and CEO resignation which should be fresh on everyone's minds).
Size of the entity was what I was trying to capture. You know that an entity like WellsFargo is not going to go out of business overnight, I don't have the same level of confidence with a 600 employee online-operation.
Also, without researching, I'm just guessing that a bricks and mortar FDIC regulated bank is reasonably safe (in the United States). I would have to sit down and do somewhat more research to be certain of an entity like Ally.
Note, these are all personal observations - the original post was indicating they were surprised that people put their money in Wells Fargo/Bank of America, etc... instead of Ally. I was just trying to supply one (personal) reason why we do it. It's entirely possible that my biases/conservative nature make those reasons ridiculous, but they are still honest.
Just for the record though, Ally is FDIC insured/regulated (and I'd guess that's true of most online banks that people actually use). I know you didn't explicitly say otherwise, but I wanted to make a note of that for anyone else who might be worried about that specifically.
For someone like you, I'd reiterate my recommendation for Schwab. But if you never pay fees as is (even from ATMs) then I could see how it may not be worth the time to switch.
Chase I use when I sell something in Craigslist for $600 and need to deposit cash. I have no good way to get cash into Ally.
So Chase is just a convenience bank for me. Also used it for the time I needed a 25k cashier check to buy my house. Ally was going to need to pay a wire fee, vs transfer and cashier check was free with Chase.
Ah, good point -- cash deposits and big paper checks (>$10k, IIRC) are a good reason to maintain a big B&M bank account. Didn't think about that since I never do either.
Yah. I keep $1500 in my checking to keep my "free" account. So kind of the trade. They get $1500 of my money that they give me no interest. I get to abuse them for cash deposits and large paper checks.
Seems fishy to me as well. Best I could find with a few minutes of googling was a 0.22% 30 day CD, but with a minimum of $95,000 [1]. Others I could find with low deposit limits are in the 0.10% area. Most banks don't even offer 30 day CDs it looks like.
I think it would be similar in lots of countries. Living in Australia, our household priority is to pay down debt. I don't understand the value of holding lots of cash while you have a mortgage. If cash is needed we can redraw.
Ofcourse public health care is free here and education is still affordable and there is a social security safety net and compulsory superannuation payments. So it isn't like a family sickness will see us lose our home and sleeping under a bridge.
Even if you gave someone without savings 600 bucks right now, chances are they'd turn around and buy a new iphone with it instead of saving it. And then you have all the people who are in a situation where they can't save if they wanted to, be it because of poor decisions or bad circumstances out of their control.
And honestly, even if you CAN save...I'm very lucky and quite privileged, and was looking at my 401k recently. It's doing quite well (yay!), but if I extrapolate to retirement, I'm not even close to what I'll need to have a comfy retirement. The majority of people are just flat out screwed.
How to solve this...who knows. Its a hard problem.
"chances are they'd turn around and buy a new iphone"
Most in that situation would spend the money, but on needs like food or medication. The "blow it on a new iPhone" meme comes from an entitled right wing culture (that also made up the concept of a "Welfare Queen
")
It's not just poor people. If it really is the case that 70% of Americans have no significant savings, then we're talking about a whole lot of people above the median income, not all of whom have unusual situations requiring them to spend everything they earn.
If more than the top 30% of people have iphones (or equally expensive phones), then some percentage of people did exactly that.
There is going to be a huge intersection of people with less than 1000$ in savings, but have an iPhone.
Perhaps that's WHY they have so little savings? I knew a family who filed for bankruptcy while having 3 macbooks they used for MS Word and Facebook. Bad spending habits and the need to keep up with the Jones are both issues.
Not all people are poor because they "waste" money, but when you consider that a lot of luxuries are considered "necessities", you have to question things.
> ... but when you consider that a lot of luxuries are considered "necessities", you have to question things.
Sometimes "luxuries" are necessities, in less obvious ways. For example, it may be very difficult to get certain types of jobs unless you display the right status symbols[1].
That's a nice site... The author has some really good points about for-profit colleges too.
The $20 Principle
I have written before about how $20 can change a
student’s life.
The $20 is slightly euphemistic but not entirely so.
We talk a lot about big money in higher education but I
know for a fact that it’s small money that can derail
one’s educational ambitions.
I was a student in a doctoral preparation program. I was
an older “non-traditional” student. I was independent. I
didn’t have children but neither was I still someone’s
child. To take advantage of this highly competitive
program, I had to submit a $100 reservation fee.
I didn’t have it.
I was $24 short.
I don't disagree with that. But that makes it at best a "semi-necessity".
But that just makes the whole "if you give someone in need 600$, they will spend it on an iphone" MORE valid. If you need status symbols just for the symbol, you might wind up skimping on physical necessities (car repairs, rent, food, etc). Whether or not that is their fault could be up for debate, but it makes the statement itself all the more true.
I only have anecdotal evidence, but people who are poor because they have bad decision making skills would drop 600$ on some "status symbol" trifle without a second thought. People who are poor because of bad luck/circumstances will try their best to save it, or spend it on bills, food, etc.
Beyond that actually good arguments people have already given you, that's just been my life experience. I was born and raised poor. Not "I'm living paycheck to paycheck in a studio apartment poor", but rather "Wondering when this week I'll have enough money to eat" poor.
And so, the people I grew up with were the same. And while iphones did not exist at the time, you can bet your ass the moment someone had just enough money to buy bread, the rest went on their new electric guitar. And the day they got their foodstamps, they would trade a portion of them so they could get a shiny new TV.
You're getting downvoted but I agree with you, the parent is jumping to a ridiculous conclusion and lacks perspective. I expect he has not had many difficult times.
It's just math: nearly 70% of people have nearly no savings, but market penetration for a lot of luxury devices when put together is a heck of a lot more than 30%. So there's an intersection. How large is it? Who knows.
And while I was never homeless, I spent most of my life having to pick between rent and food and surrounded by people who were in the same boat. That's where I've seen that situation happen times and times again.
If Americans are truly NOT saving (as opposed to just not using savings accounts):
Yes, being judgmental without knowing the whole story isn't a good thing, but that misses the point: people are choosing to spend instead of save-and many times it's on luxuries. He's not just talking about the poor.
It is a fact that an iPhone is a luxury. There are plenty of much cheaper phones that function exactly the same as an iPhone. But through excessive marketing and a digitized world, people are convinced they NEED an iPhone. They're convinced they NEED a $1500 Macbook Pro for school in liberal arts.
It's not good to make judgments on the poor, but this is 69% of Americans, not just the poor (impoverished are closer to 15%), and that's the scary part. Most but the top 30% are spending above their means, and getting credit to do it, in an economy that's probably not going to grow like it did in the 20th century.
Well no, that was exactly my point. People who are privileged and don't have anything stopping them from saving, still don't and screw themselves over.
If that's true, then people for whom it's difficult/impossible to save are completely screwed, and we need to chance something, because the odds really ARE stacked against them.
"The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all."
Maybe they were joking, who knows. That same thing said that people making $100,000-$150,000 couldn't come up with $2,000 when asked on the street or something like that. Probably if someone asks me these questions on the street I'm not going to be honest either.
I have $0 in checking, $30 in Paypal, maybe $10 in bitcoin, no house, car, almost 0 furniture. No assets. I have been working for mainly startups (including my own for no pay part of that time) or small companies for the last several years.
The reason there is no savings is because there is never any extra in recent years. There have always been things I went without, like insurance or more recently a car. Or eating out hardly ever.
Do you expect the startups to pay out? Seems sort of like waiting to win the lottery. Even if it does pay out, maybe on average you won't come out ahead compared to a 9-5 daily grind.
Maybe people ought to do the opposite. Work for the risky startup during middle age when you have a cushion built up, and you are opt not to give a shit.
Um, off-topic but you might be making poor life choices here.
First of all we're in the middle of a boom cycle and any competent engineer (which I assume you are) can get a six-figure salary WITH equity at even the earliest-stage funded startups.
Second, your chances of making it big on equity alone are pitifully small. The expected returns on startup equity is less than the salary cut you take when compared with the stable job at Big Co. The median return is zero.
If you were bootstrapping your own startup with only ramen profitability, I would have mad respect for you. But you say you aren't even working on your own startup right now. Wherever you are working you are likely very underpaid for what you are doing.
What assets? That Ram on the driveway loaded with a bike/jetski/boat on a trailer? 50' TV? iphones all around? its all on lease 40 days away from being repo'd.
Since it's talking about savings I would assume it means highly liquid assets I would assume a house wouldn't be liquid enough to use in the survey just stuff like how much money you have saved.
I've seen this study before from another source, and it seemed pretty clear the answer was "Savings Account", as opposed to checking account or investments.
If that's the case here, then this is a beyond-vapid statistic. Savings accounts are worthless. $1000 in my savings account will, after ten years, earn me $5 in interest.
The article specifically says savings accounts. Only a damn fool would keep money there long term. My checking account earns 5x the interest and the money market account at my brokerage is about the same.
Obviously "savings account" and "in savings" are not the same thing. This survey and article don't seem professional - basically this is clickbait or they are clueless.
But the main issue still is real. Regardless of "savings account" status, other studies show ~half of Americans are financially insecure today. Should an emergency expense of $2000 come up they don't have it.
The problem is getting worse as baby boomers retire. If you include underfunded retirement savings in the group at risk then the vast, vast majority of Americans are in a financially insecure position.
Pew Trusts did a study as well: "One in 3 American families reports having no savings at all, including 1 in 10 of those with incomes of more than $100,000 a year."
"41 percent did not have enough liquid savings to cover the $2,000 cost of the typical household’s most expensive financial shock."
Wow I was expecting a full blown article, and instead found something smaller than a write in opinion piece.
Even worse the source document has far more interesting data on it, sorting by gender/age/location. Even if it is a self serving study by a service that is in the business of selling savings accounts.
The data is pretty scary though. After finally getting a 6 month runway of living expenses I can't imagine going back. Even having a month or two runway makes it so easy to not make unreasonable mistakes.
This is a stupid article. I don't even have a savings account. WTF is even the point when the interest is negligible? Money I need access to stays in my checking account, savings go in Vanguard.
89 comments
[ 4.1 ms ] story [ 163 ms ] thread> ...asked 7,000 people around the country how much money they had set aside in savings accounts for the future...
I think that would include CDs and other savings vehicles. It is unclear if that counts retirement accounts.
"The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?"
http://www.theatlantic.com/magazine/archive/2016/05/my-secre...
1 in 3 Americans has $0 saved for Retirement, and 56% have less than $10,000
http://time.com/money/4258451/retirement-savings-survey/
I guess the question I would have is "What is the 10th/25th/Median percentile of net-liquidity" and "What is the expected downstream third-party income from Social Security/Pensions/etc..." expected. That paints a fuller picture of people's financial stability, and also identifies how important Social Security is to their wellbeing.
Yeah, forget the saving account. Retirement is going to be the real issue. Lot of people going to be eating dog food in the future.
Pensions for anyone under 45 are pretty much non existent, with a few exceptions. Even if they are, the companies tend to screw with them. Our company just froze the salary for pension calculations (not that I have one), so somebody could work another 20 years and retire at a percentage of today's pay.
At least I get a crappy annuity and 401k matching. New hires now get neither.
However, the truth is that a majority of Americans worry about how to pay food and rent every month. This is not because they are all irresponsible human beings, but because American society makes it really freaking terrible to be in the bottom half. Retirement is out of reach; saving for an emergency has to fight with rent has to fight with prescription medications has to fight with clothes for your kids.
I feel the descriptor of middle class has moved away from X% disposable income and that you are describing a 'traditional' middle class. I do not live in the US however and could be tainted by my personal experience in AUS.
If I had to pony up $400, I would definitely use a credit card because its what I have on me.
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.
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.
Somewhat tangentially, it always surprises me that people continue to use checking/savings accounts from banks like Chase, Wells Fargo, Bank of America, etc. when they pay terrible interest rates, don't reimburse ATM fees, and sometimes actually charge you for debit cards and/or paper checks. If it's the thought of not having access to real brick & mortar banks that scares you, Schwab is a great option (though they pay much less interest than the top online ones).
If you have your paycheck auto-depositied, you can avoid most/all of the fees.
Also, without researching, I'm just guessing that a bricks and mortar FDIC regulated bank is reasonably safe (in the United States). I would have to sit down and do somewhat more research to be certain of an entity like Ally.
Note, these are all personal observations - the original post was indicating they were surprised that people put their money in Wells Fargo/Bank of America, etc... instead of Ally. I was just trying to supply one (personal) reason why we do it. It's entirely possible that my biases/conservative nature make those reasons ridiculous, but they are still honest.
Just for the record though, Ally is FDIC insured/regulated (and I'd guess that's true of most online banks that people actually use). I know you didn't explicitly say otherwise, but I wanted to make a note of that for anyone else who might be worried about that specifically.
For someone like you, I'd reiterate my recommendation for Schwab. But if you never pay fees as is (even from ATMs) then I could see how it may not be worth the time to switch.
Yes, Wells Fargo is a bigger company but Ally is no small potato.
That might be an answer to you but it's not an answer to anyone asking. What's so terrible about Ally?
Ally I put real savings in.
Chase I use when I sell something in Craigslist for $600 and need to deposit cash. I have no good way to get cash into Ally.
So Chase is just a convenience bank for me. Also used it for the time I needed a 25k cashier check to buy my house. Ally was going to need to pay a wire fee, vs transfer and cashier check was free with Chase.
Overall yes I hate Chase.
We have a mutually abusive relationship.
1. https://www.usaa.com/inet/pages/bank_cd_rates
Ofcourse public health care is free here and education is still affordable and there is a social security safety net and compulsory superannuation payments. So it isn't like a family sickness will see us lose our home and sleeping under a bridge.
Even if you gave someone without savings 600 bucks right now, chances are they'd turn around and buy a new iphone with it instead of saving it. And then you have all the people who are in a situation where they can't save if they wanted to, be it because of poor decisions or bad circumstances out of their control.
And honestly, even if you CAN save...I'm very lucky and quite privileged, and was looking at my 401k recently. It's doing quite well (yay!), but if I extrapolate to retirement, I'm not even close to what I'll need to have a comfy retirement. The majority of people are just flat out screwed.
How to solve this...who knows. Its a hard problem.
Most in that situation would spend the money, but on needs like food or medication. The "blow it on a new iPhone" meme comes from an entitled right wing culture (that also made up the concept of a "Welfare Queen ")
Or debt. (Real debt -- the ones where they break your legs if you don't repay.)
> The "blow it on a new iPhone" meme comes from an entitled right wing culture
I would have kept "right wing" out of it. Entitlement stereotypes are on both sides of the aisle, no need to make this partisan.
The first use of the term that I can find is from Jet Magazine in 1974. They're hardly "right-wing".
https://books.google.com/books?id=DVsDAAAAMBAJ&lpg=PA1&pg=PA...
There is going to be a huge intersection of people with less than 1000$ in savings, but have an iPhone.
Perhaps that's WHY they have so little savings? I knew a family who filed for bankruptcy while having 3 macbooks they used for MS Word and Facebook. Bad spending habits and the need to keep up with the Jones are both issues.
Not all people are poor because they "waste" money, but when you consider that a lot of luxuries are considered "necessities", you have to question things.
Sometimes "luxuries" are necessities, in less obvious ways. For example, it may be very difficult to get certain types of jobs unless you display the right status symbols[1].
[1] https://tressiemc.com/2013/10/29/the-logic-of-stupid-poor-pe...
But that just makes the whole "if you give someone in need 600$, they will spend it on an iphone" MORE valid. If you need status symbols just for the symbol, you might wind up skimping on physical necessities (car repairs, rent, food, etc). Whether or not that is their fault could be up for debate, but it makes the statement itself all the more true.
I only have anecdotal evidence, but people who are poor because they have bad decision making skills would drop 600$ on some "status symbol" trifle without a second thought. People who are poor because of bad luck/circumstances will try their best to save it, or spend it on bills, food, etc.
Beyond that actually good arguments people have already given you, that's just been my life experience. I was born and raised poor. Not "I'm living paycheck to paycheck in a studio apartment poor", but rather "Wondering when this week I'll have enough money to eat" poor.
And so, the people I grew up with were the same. And while iphones did not exist at the time, you can bet your ass the moment someone had just enough money to buy bread, the rest went on their new electric guitar. And the day they got their foodstamps, they would trade a portion of them so they could get a shiny new TV.
That's just human nature.
And while I was never homeless, I spent most of my life having to pick between rent and food and surrounded by people who were in the same boat. That's where I've seen that situation happen times and times again.
Yes, being judgmental without knowing the whole story isn't a good thing, but that misses the point: people are choosing to spend instead of save-and many times it's on luxuries. He's not just talking about the poor.
It is a fact that an iPhone is a luxury. There are plenty of much cheaper phones that function exactly the same as an iPhone. But through excessive marketing and a digitized world, people are convinced they NEED an iPhone. They're convinced they NEED a $1500 Macbook Pro for school in liberal arts.
It's not good to make judgments on the poor, but this is 69% of Americans, not just the poor (impoverished are closer to 15%), and that's the scary part. Most but the top 30% are spending above their means, and getting credit to do it, in an economy that's probably not going to grow like it did in the 20th century.
If that's true, then people for whom it's difficult/impossible to save are completely screwed, and we need to chance something, because the odds really ARE stacked against them.
"The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all."
http://www.theatlantic.com/magazine/archive/2016/05/my-secre...
The reason there is no savings is because there is never any extra in recent years. There have always been things I went without, like insurance or more recently a car. Or eating out hardly ever.
Maybe people ought to do the opposite. Work for the risky startup during middle age when you have a cushion built up, and you are opt not to give a shit.
First of all we're in the middle of a boom cycle and any competent engineer (which I assume you are) can get a six-figure salary WITH equity at even the earliest-stage funded startups.
Second, your chances of making it big on equity alone are pitifully small. The expected returns on startup equity is less than the salary cut you take when compared with the stable job at Big Co. The median return is zero.
If you were bootstrapping your own startup with only ramen profitability, I would have mad respect for you. But you say you aren't even working on your own startup right now. Wherever you are working you are likely very underpaid for what you are doing.
If you are in the lucky minority, be honest with yourself and put money aside while it lasts. I have friends for whom it didn't.
Also it would be helpful to see how this has changed over time.
https://us-history-the-great-depression.wikispaces.com/Easy+...
If that's the case here, then this is a beyond-vapid statistic. Savings accounts are worthless. $1000 in my savings account will, after ten years, earn me $5 in interest.
But the main issue still is real. Regardless of "savings account" status, other studies show ~half of Americans are financially insecure today. Should an emergency expense of $2000 come up they don't have it.
The problem is getting worse as baby boomers retire. If you include underfunded retirement savings in the group at risk then the vast, vast majority of Americans are in a financially insecure position.
Pew Trusts did a study as well: "One in 3 American families reports having no savings at all, including 1 in 10 of those with incomes of more than $100,000 a year."
"41 percent did not have enough liquid savings to cover the $2,000 cost of the typical household’s most expensive financial shock."
Link to Pew report [pdf] http://www.pewtrusts.org/~/media/assets/2015/11/emergencysav...
Even worse the source document has far more interesting data on it, sorting by gender/age/location. Even if it is a self serving study by a service that is in the business of selling savings accounts.
The data is pretty scary though. After finally getting a 6 month runway of living expenses I can't imagine going back. Even having a month or two runway makes it so easy to not make unreasonable mistakes.