It appears Americans are increasingly becoming weary of the traditional banking system in the country. The old savings accounts are slowly being drained and citizens are diverting the funds either to a secret location or investing rather than keeping the money dormant with a bank.
A recent report from American Express, one of the world's largest financial institutions, indicates more Americans are steadily turning away from the traditional bank savings accounts. As per the report, a majority of consumers still say they'll keep their savings at a local bank (57 percent vs. 55 percent in 2014). However, more than half (53 percent) of those who keep their savings in cash plan to hide bills in a secret location at home.
In simple terms, 43 percent of the American citizens who are saving some money do not plan to do so in a bank account. This news is indeed bad for the banks and other financial institutions, which dearly depend on the deposit and savings account in order to be able to give out loans and charge hefty interest rates to keep the financial sector functioning and healthy.
This is an interesting revelation, primarily because the average citizen has always been taught to build his savings in a bank, instead of hoarding it somewhere "unsafe," say a mattress. For well over a hundred years, the practice of opening a bank account at an early age and then building up a bank balance has been religiously or sometimes fanatically followed. The implied importance of a healthy bank balance has been stressed or many-a-times thrust upon us since childhood.
But surprisingly, opening a savings account and putting our hard-earned money in it, is no longer a good idea and there are quite a few reasons for it.
One of the most important things to consider is - deposit accounts are not legally protected. Moreover, the Federal Reserve passed a policy that in the event of an economic crisis (think "bank run") the accounts can be frozen to preserve the liquidity of the banks. In simpler terms, your money's solely yours only when you physically hold it or better yet, convert it into something that doesn't lose value (read inflation), explained alternative asset manager Eric Sprott,
"In my mind the biggest reason to own precious metals is because of the risks in the banking system… you get nothing for putting your money in the bank… and yet when you have your money in the bank you take on all the risks of a leveraged bank… and I've always thought it's the risks in the banking system that would cause people to go to gold.Experts do not advise stashing money in the house, but invest it in "being prepared". Investing in tangible goods like food, firearms, preparedness supplies, property investments and precious metals is the best way to keep the value of money intact and growing instead of allowing banks to play with it.
And now you have another level of concern out there and that is, of course, the currency risk. We've seen so many currencies that have been incredibly weak."
[Image Credit | Nielsen Local]