You may wonder… How much I should have in savings at 40 or 50 or even 60 years old?
If you are in mid-life, and wondering how much money you should keep in savings, you could be worried if you are not saving enough.
I have been asking myself the same question.
I work in sales and so it always seems like feast of famine for me and my family.
If I manage to land a nice client, I’ll get a check from the insurance company I work for, but if not…?
As such, I seem to always find myself preparing for some sort of financial crisis by saving too much and keeping it in my 0.01% “high yield savings“2 account at Wells Fargo.
But keeping too much money in savings can cost you money, especially if it is in an account with Wells Fargo.
How Much Should I Have In Savings At 40?
You should keep 6-9 months of living expenses in liquid assets in a high yield FDIC secured savings account.
This is extra true if you’re in the same boat as me and don’t get a steady paycheck.
So, for example, if you are lucky enough to have $100,000 saved up, if you and your family need $10,000 per month to live, you should have between $60-90K in the bank.
But if you ARE keeping $60-90K of dry powder lying around… Trust me, you don’t want it to be with Wells Fargo…
Why Does A Basis Point Suck As A Measure of Return?
Why should you not have your savings held at Wells Fargo?
Because Wells Fargo is paying you between 1 and 5 basis points. A basis point is one one hundredth of 1%… Or, 0.0001.
And with a whopping return like that, after a year, you will have earned:
$60,000 in savings:
- $6.00 in interest per year at 0.01%
- $30.00 in interest per year at 0.05%
$90,000 in savings:
- $9.00 in interest per year at 0.01%
- $45.00 in interest per year at 0.05%
And that’s before taxes at your ordinary income rate.
Don’t forget, Uncle Sam still wants his ~30% of your ordinary income.
What Banks Offer the Highest Yield Savings Accounts?
At the moment, CIT Bank, SynchronyFinancial, Marcus by Goldman Sachs, Barclays and Ally Bank offer the highest rates for savings accounts.
CIT Bank offers you a 31x greater return than Wells Fargo…
Of course, 31x 0.05 is not much, but 1.55% is the best you can get in today’s environment.
Roughly translated from Yiddish meaning “shivering shit balls“.
Seriously, should banks be able to market a 0.01-0.05% rate of savings as “high yield”?