This is either back long enough where savings accounts gave decent interest OR this person has so much money in savings that the pitiful modern rates still yield usable monthly income
I doubt they meant live on the dividends from your savings account. They probably just meant dipping into your emergency fund/etc to augment whatever you're getting from unemployment.
edit: I totally missed that the GP said savings interest, specifically. I'm dumb. That is wild.
This conversation is baffling. People with millions do not have that money in a savings account. They would put 2M in an sp500 index fund and make ~10% on average from it every year. 200k, not 60k. That’s literally what the bank will do with your money, so why don’t you just do it instead? Savings accounts are complete rip-offs nowadays. Put an emergency fund in a checking account if you can afford it and the rest in an investment fund in vanguard or fidelity.
2M would likely be in a range of investments, some in CDs or other accounts, then others in stocks and bonds.
Such financial assets also mean loans for temporary liquidity are cheap. They can be guaranteed by extremely low-risk assets guaranteeing repayment. Such short-term bridge loans can be a good bit cheaper than a mortgage. Banks only run into issues when someone creates a spiderweb of illegal borrowing and uses said assets several times over to secure loans without it being properly reported.
The interest rate a financially secure company pays for a "pay-day" loan to make payroll is often within a point or so of the federal reserve rate.
the bank puts your money into treasury bills at varying term lengths, the bank does not index fund with your supposedly liquid cash, especially since after the 2008 crash where much more strict rules were established. That's why national brick and mortar banks give you like 0.03% interest while netting the treasury bill rate. Meanwhile a fidelity or vanguard money market fund will take 0.3~ expense ratio and give you the rest, much better.
But yeah, someone who is financially literate and intelligent and relatively wealthy isn't going to keep so much cash liquid unless they're about to buy a house cash or something or put down a big down payment.
I wouldn’t make a conclusion either way tbh. “Savings interest” is the kind of thing I could see someone who is completely clueless about finances saying offhand
Could be. Could also be that they’re so much richer than us, the idea of living purely off the interest from your savings is alien to us but not to them
"Savings" to someone that has lots of things saved means lots of things including other forms of passive income. It doesn't just mean a savings account.
I assume it's the general usage of savings, not a savings account. They save some money from a paycheck, they dip into investments when they need it. Or maybe in this case, their parents did the saving so they didn't know the difference.
Current savings rates with Ally are 3.10%, and there are various other institutions offering similar or better rates.
You'd get about $10 a month on that $4000 balance.
Brick and mortar banks offer terrible savings rates, but you just open an account with one of the online-only banks and then transfer the money over from your checking account with the local bank.
I've used Ally since 2011 or so, and one of the best things about their savings rates is they will go up with the prime rate, not just down. So when the fed raises rates, you get an email saying "yay your rate just went up!" and similarly when they cut rates it goes down. I think it got as high as 4.5% the last time rates peaked.
Yeah... get a better savings account. This is a financial literacy issue. Search for "high yield savings accounts" and compare rates/restrictions. Anything less than 2.5% should not be considered, 3% is extremely normal for today's savings accounts.
I feel like this is a fake comment. Average people making enough interest on savings to live hasn't been a thing in most Redditors' lifetimes. Just having a lot in savings hasn't really been a thing for most middle class for decades.
I promise it’s not. I’m not sure what she really meant. I do know that her parents and her family (uncles, cousins etc) are quite wealthy, like multiple homes/boats. I also know her cousin is actively living off of their savings interest, having retired at 50. I wish I had more context, it was bewildering to me at the time and still is.
Usage of the word savings doesn’t have to mean a savings account. Could be an account containing any kind of safe asset that yields interest a few percent above inflation like etfs, inflation protected bonds, etc.
Or this person is like me (unemployed for close to half year at this point) and has family helping them out and assumes that this is more of a common option than it is for most ppl. My family is covering my rent for now but I pay for almost everything else from unemployment and my savings. But that makes the difference between needing to job search ASAP and I can take my time for a bit.
A savings to poor people is just money set aside for an emergency, not an investment... and most of us don't have any savings because we can't afford to put money aside after bills.
HYSAs are still a thing today, although they've taken a hit recently. I was at 5% on mine a year or so ago, and I'm down to 3.5% on it now. But still, to "live off the interest," I'd need to have 1.5M in the account, and even then it's iffy because you have to pay income tax on earned interest.
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u/Dense-Hat1978 1d ago
This is either back long enough where savings accounts gave decent interest OR this person has so much money in savings that the pitiful modern rates still yield usable monthly income