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The Pros and Cons of Miniscule Savings Account Yields

By Ben Carlson, CFA
A Wealth of Common Sense

Today’s paltry yields don’t come close to covering taxes and inflation.

Looking at these numbers brings up some questions:

  • What if we never go back to the halcyon days of risk-free income on our savings?
  • Why should people earn so much money on money that takes no risk?
  • How do retirees find “safe” income from their investments in a world with no “safe” yield?
  • Which one would you rather have—higher yield on your savings account or lower yield on your debt?

How you feel about the current rate situation has a lot to do with where you are in life. If you’re a retiree who has their mortgage paid off and just needs their portfolio to throw off some income, you’re none too pleased with where rates are. If you’re a young person who is borrowing money to buy a home, you should be thrilled with where rates are.

Yes, it’s harder to earn risk-free interest on your savings, but the amount you can save over the lifetime of a loan can more than make up for lost interest income.

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z - Cover Image: The Pros and Cons of Minuscule Savings Account Yields