Posts Tagged ‘interest’

How Much Cash do Americans Keep on Hand?

Thursday, March 5th, 2009

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What’s in your pocket?


Americans are losing faith in banks, period. That goes without saying and no explanation is needed. We all know this. The stock market is falling; banks are going down and receiving money just to keep themselves afloat. What is the average American doing? They are stashing their cash or carrying it with them! In the past year, since gas prices started skyrocketing, Americans have started looking twice at their bank accounts and getting nervous. Even then there was talk of there being a recession. People started withdrawing their money in a frenzy and selling their stocks, starting to stash it at home and carrying large amounts in their wallets. So how much money do Americans carry in their wallets, and how much money is stashed in American homes?

The amount of cash Americans carry on their person is directly affected by the area of the country they live in. People in New York and Los Angeles are going to carry way more money than someone who lives in a smaller town like Lorain, Ohio or El Paso, Texas. Since the cost of living is so different, the cash one carries for basic necessities would be much higher in New York City and way lower in Lorain, Ohio. The demographics on carrying money look like this:
The average purse or wallet in the United States contains about $104.

13% of Americans use a piggy bank.

28% of Americans have a coin jar.

15% if people in the U.S. have a large amount of cash hidden in their houses. Out of these people, half of them have it hidden and the other half hide it in plain sight.

1/3 of Americans keep a small amount of cash on hand for emergencies.

Finally, more than 50% of American’s don’t keep any cash at all in the house.

American’s carry cash so they don’t have to use credit cards, foregoing the interest usually incurred in that way. People carry cash because they don’t trust the banks and they haven’t been able to trust banks for at least a year or more. Some carry cash because that’s what they’ve always done and that’s what they were taught to do. Sure a lot of people go into a bank or through the drive through to cash their paychecks, in return getting their cash for no extra fees. What about those who don’t go to the bank and whose checks are automatically deposited? These people will usually hit up the ATM. It’s difficult if possible at all to not incur a fee when using the ATM so this way of obtaining your cash is costing you money. Is the tradeoff worth it?

Some might argue that we’re becoming a no cash society; using less cash and more and more debit and credit cards. I wonder if these people have taken a look at the economy lately because I think we may be going back to using as little plastic as possible.

The Value of a Dollar-It’s more than just 100 Cents

Wednesday, March 4th, 2009

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The value of our dollar depends strongly on the values of the dollars of other countries, exchange rates and interest rates. The interest rate in the United States from the Federal Reserve dropped to 4.75% in September 2007. Other banks around the world did not follow when this happened. This means that the European Central Bank (the home of the euro) has a higher interest rate right now than the Federal Reserve. Basically holding a Euro in your hand would be worth more in interest than holding a dollar in your hand. At this time in the dollar’s life, which would you choose?

Because of this difference in interest rate, other countries around the world are thinking like you and I are. They’re diversifying their holdings from dollars to Eruos and even British pounds for this same reason. In a supply and demand aspect, this situation causes there to be a large supply of dollars making them worth less. This loss in value caused the oil industry to charge higher prices, hence the skyrocket this past summer. Other countries don’t want the dollars they get for oil so they exchange them for Euros. It’s an endless cycle that has only gotten worse, despite understanding the root of the problem.

The dollar dropping is a double edged sword. On one hand, many manufacturers want to produce their products in factories in the United States, bringing us jobs. The reason manufacturers want to bring their factories here because it’s so cheap to run because of the low dollar value yet they can sell them overseas for the value of the Euro. On the other hand, the low dollar causes inflation. We know how bad that can be. Everything becomes more expensive in order to make up for the dollar value going down. Companies still want to make a profit on their goods so the cost of everything rises.

In order to get bonds to sell, they will be cheaper and have higher interest rates. These interest rates correlate to mortgage rates which don’t seem to be dropping anytime soon. Our weak dollar is also scaring away foreign investors who are now afraid to own stock in US companies. Foreign nations who have a lot invested in the dollar have the ability to cause a nuclear financial meltdown for the United States. They could easily exchange their dollars for something else, releasing our money into circulation, causing the value to plummet.

All in all, yes the dollar is worth 20 times less than it was in 1913 but a year or two ago, we knew that and we were used to it. Right now, on top of the 20 times less, it is losing more value in front of our eyes. I’m no one to give financial information but now that you know about the value of the U.S. dollar, just watch what you do with it. Buy and sell carefully because this is a delicate time for our economy.

How and Why to Start a Savings Account

Tuesday, March 3rd, 2009

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Put your money where the bank is.


Get that cash out from under your mattress and your bra is not a good hiding spot. I’ve seen some funny and innovative places that people have hidden their cash but none of those places is safer than the bank. Does your mattress doesn’t pay you to put money under it? Well a bank does.

First things first, you want to find the bank that’s for you. If you’re a walk-in type of person, you’ll want a bank that has a branch in your area. If you’re internet savvy, you might want a bank where you can control everything online. Interest rate is also a big factor you should take into consideration when choosing a bank. The higher the interest rate, the more money you will make putting your money in that bank. Some banks require or “suggest” you start your account with a certain amount. This could be anywhere from $500 to $5000 to much more. Some suggest you keep a certain minimum balance your account. These are all things you want to know before you start putting your money anywhere and before you sign anything!

Next you should decide if you’re saving towards a purpose (like a home or car) or just to save for your future. Something like this can make a difference to the banker when you go to open your account. Decide on an amount from every paycheck that will go into your account automatically. Try not to deviate from this amount. A general rule is 10% of the money you bring in. You could also set up a change jar and save up extra change and dollars in between paychecks. You’ll be AMAZED how much change adds up. Once you’ve chosen your bank and you’re familiar with that bank’s practices, policies and interest rate go ahead and sign up. If you do this online you may have to send in a form with your signature or some official documents.

Why in the world would you want to start a savings account to begin with? Isn’t a checking account enough? Isn’t my pocket enough? Well, to tell the truth, the easier the access you have to your money, the more likely you are to spend it. That’s just a simple fact. You need to have some backup money that you have access to but that isn’t the easiest, first route you go through to pay for something. You need a savings account to save for an emergency. In case your car breaks down or you have something unexpected comes up from across the country. You don’t want to have to pull out a credit card if you don’t have to. Save for retirement, save for college, save up for a vacation. No matter what it’s for, even just a rainy day, even just a dollar here and there, SAVE your money. You’ll thank me later.