Misperceptions Hindering Americans' Savings Ahead of Holiday Season
Tuesday, Nov 19, 2024 1:54 pm ET
5min read As the holiday season approaches, many Americans find themselves struggling to save money. According to a recent survey by Santander Bank, misperceptions about high-yield savings accounts are preventing Americans from earning more on their money. In this article, we will explore the findings of the survey and discuss how these misperceptions can be addressed to help Americans maximize their savings.
The survey found that fewer savers added to their balances in recent months, with six in 10 stating it has become harder to save as the year has gone on. Less than three in 10 (29%) use high-yield savings products, which could help a typical saver earn more than $400 in interest annually. Nearly six in 10 say holiday shopping will negatively impact their savings goals, and three in four prefer to receive the gift of money this holiday season.
Santander Bank's Openbank Growing Personal Savings (GPS) Tracker revealed that many consumers are missing out on hundreds of dollars a year in interest by not using higher-rate savings accounts. More than seven in 10 (71%) are not taking advantage of these accounts, including high-yield savings accounts, money market accounts, and certificates of deposit (CDs). Among those who have a higher-rate account and know their rate, 56% are earning at least 3% in interest, significantly above the national average annual percentage yield (APY) of 0.45%*.
The survey identified five main misperceptions preventing consumers from using higher-rate accounts to accelerate savings growth:
1. Breaking up with your bank: Nearly six in 10 (58%) do not realize that you can open a high-yield savings account without leaving your primary bank.
2. Security of funds: Six in 10 (63%) are unaware that many high-yield savings accounts are FDIC-insured.
3. Access to your money: Seven in 10 do not realize you can access savings in a high-yield savings account in a matter of days.
4. Unaware of savings growth opportunity: Four in 10 do not know their current interest rate, and seven in 10 (72%) are not aware that yields on savings are generally at their highest level in more than 15 years.
5. Account set-up: Nearly eight in 10 (78%) think it takes 10 minutes or longer to open an online savings account, whereas some offerings can be set up in five minutes or less.
These misperceptions have led to inaction and even regret, with 61% of higher-yield account holders wishing they had opened one sooner. Four in 10 (42%) of those who have not yet opened a higher-rate account wish they had already done so.
"Consumers work hard for their money, and their money should work hard for them," said Swati Bhatia, Head of Retail Banking and Transformation at Santander Bank. "Unfortunately, misunderstandings around the time, accessibility, and security of having a digital high-yield savings account could deter many Americans from earning interest that can offset real-life expenses like gas or groceries. At Santander, we are working to educate consumers on the benefits of high-yield savings while providing a platform that offers the speed and convenience of a fintech with the strength and stability of a global bank."
Many Americans could earn more interest on their money and accelerate savings growth by using a higher-rate account. For example, a typical saver with $8,000 in a high-yield savings account earning 5.00% APY could generate more than $400 in interest after one year. The savings growth can be even more substantial for those with higher starting balances. A saver with a $25,000 initial deposit could earn nearly $1,300 in interest over the same time in an account earning 5.00% APY.
Saving was harder in Q3, with more than eight in 10 Americans (83%) facing obstacles to growing their savings. As a result, most Americans were forced to make spending cuts to save in Q3, including 75% who made some sacrifice such as cutting back on dining out or entertainment and other discretionary purchases. The survey found that half of savers added to their balances in August and September, the lowest readings this year, and six in 10 (61%) indicate it has become harder to save as the year has gone on.
Holiday shopping could prove to be even more difficult in Q4, with an anticipated record-setting holiday shopping season just around the corner. A third of Americans (34%) say they will spend more this holiday season, with nearly half of those with children under 18 years old (45%) saying the same. Overall, six in 10 (58%) say holiday shopping will negatively impact their future savings goals. This holiday season, most Americans (75%) agree they would prefer to receive the gift of money to add to their savings.
In conclusion, misperceptions about high-yield savings accounts are preventing Americans from earning more on their money, especially ahead of the holiday season. By addressing these misperceptions and educating consumers about the benefits of high-yield accounts, financial institutions can help Americans maximize their savings and achieve their financial goals.
The survey found that fewer savers added to their balances in recent months, with six in 10 stating it has become harder to save as the year has gone on. Less than three in 10 (29%) use high-yield savings products, which could help a typical saver earn more than $400 in interest annually. Nearly six in 10 say holiday shopping will negatively impact their savings goals, and three in four prefer to receive the gift of money this holiday season.
Santander Bank's Openbank Growing Personal Savings (GPS) Tracker revealed that many consumers are missing out on hundreds of dollars a year in interest by not using higher-rate savings accounts. More than seven in 10 (71%) are not taking advantage of these accounts, including high-yield savings accounts, money market accounts, and certificates of deposit (CDs). Among those who have a higher-rate account and know their rate, 56% are earning at least 3% in interest, significantly above the national average annual percentage yield (APY) of 0.45%*.
The survey identified five main misperceptions preventing consumers from using higher-rate accounts to accelerate savings growth:
1. Breaking up with your bank: Nearly six in 10 (58%) do not realize that you can open a high-yield savings account without leaving your primary bank.
2. Security of funds: Six in 10 (63%) are unaware that many high-yield savings accounts are FDIC-insured.
3. Access to your money: Seven in 10 do not realize you can access savings in a high-yield savings account in a matter of days.
4. Unaware of savings growth opportunity: Four in 10 do not know their current interest rate, and seven in 10 (72%) are not aware that yields on savings are generally at their highest level in more than 15 years.
5. Account set-up: Nearly eight in 10 (78%) think it takes 10 minutes or longer to open an online savings account, whereas some offerings can be set up in five minutes or less.
These misperceptions have led to inaction and even regret, with 61% of higher-yield account holders wishing they had opened one sooner. Four in 10 (42%) of those who have not yet opened a higher-rate account wish they had already done so.
"Consumers work hard for their money, and their money should work hard for them," said Swati Bhatia, Head of Retail Banking and Transformation at Santander Bank. "Unfortunately, misunderstandings around the time, accessibility, and security of having a digital high-yield savings account could deter many Americans from earning interest that can offset real-life expenses like gas or groceries. At Santander, we are working to educate consumers on the benefits of high-yield savings while providing a platform that offers the speed and convenience of a fintech with the strength and stability of a global bank."
Many Americans could earn more interest on their money and accelerate savings growth by using a higher-rate account. For example, a typical saver with $8,000 in a high-yield savings account earning 5.00% APY could generate more than $400 in interest after one year. The savings growth can be even more substantial for those with higher starting balances. A saver with a $25,000 initial deposit could earn nearly $1,300 in interest over the same time in an account earning 5.00% APY.
Saving was harder in Q3, with more than eight in 10 Americans (83%) facing obstacles to growing their savings. As a result, most Americans were forced to make spending cuts to save in Q3, including 75% who made some sacrifice such as cutting back on dining out or entertainment and other discretionary purchases. The survey found that half of savers added to their balances in August and September, the lowest readings this year, and six in 10 (61%) indicate it has become harder to save as the year has gone on.
Holiday shopping could prove to be even more difficult in Q4, with an anticipated record-setting holiday shopping season just around the corner. A third of Americans (34%) say they will spend more this holiday season, with nearly half of those with children under 18 years old (45%) saying the same. Overall, six in 10 (58%) say holiday shopping will negatively impact their future savings goals. This holiday season, most Americans (75%) agree they would prefer to receive the gift of money to add to their savings.
In conclusion, misperceptions about high-yield savings accounts are preventing Americans from earning more on their money, especially ahead of the holiday season. By addressing these misperceptions and educating consumers about the benefits of high-yield accounts, financial institutions can help Americans maximize their savings and achieve their financial goals.
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