Most Americans have savings accounts, but many are unaware of how their idle funds generate interest. A recent study involving 2,000 Americans, commissioned by LendingClub and conducted by Talker Research, found that 89% of respondents are familiar with at least one type of savings account. The most recognised being a standard savings account, followed by retirement accounts, certificates of deposit (CDs), and health savings accounts (HSAs).
However, awareness drops significantly when it comes to specific types of accounts. Only 30% of respondents knew about high-yield savings accounts (HYSAs), 18% about 529 college savings plans, and 13% about cash management accounts. Interestingly, while 79% have a savings account and earn interest on their funds, 43% are unaware of the actual interest rate their account offers.
The survey also highlighted misconceptions: two-thirds of respondents believe they need more money in their accounts to earn a higher interest rate, while 41% think that interest rates are similar across all banks.
An expert emphasises the importance of understanding your interest rates. Mark Elliot, chief customer officer at LendingClub, stated, 'Many people have basic savings accounts, and that's a great start. But you also need to understand the rate you're earning or if there are fees. To really get the most out of your savings, you need to look at those elements and understand how savings can turbocharge your financial situation over time.'
Understanding Savings and Emergency Funds
Regarding emergency funds, 54% of respondents said they have set aside money separate from their savings accounts, and 74% of these are confident that their emergency fund is sufficient for unforeseen circumstances.
The survey provided insights into how Americans utilise different savings account types. For example, individuals with standard savings accounts typically make around 18 contributions annually, with 73% contributing at least once a month. The average account holder has maintained their account for approximately 15 years, starting at age 36. However, only 57% are aware of the interest rate they earn.
Those with CDs tend to hold their accounts for an average of 11 years, generally starting at around age 46. About 67% of CD holders report feeling more confident about their financial situation since opening their accounts. When CDs mature, most tend to open a new one; others transfer their funds into HYSAs or use the money to pay off debts.
HYSA holders also contribute to their accounts an average of 18 times a year, with most adding funds at least once a month. They are generally more aware of their interest rates, with 82% knowing the exact rates their accounts earn.
In terms of spending habits, many savings account holders would utilise their funds for emergencies, building a retirement fund, or holidays. About 27% would use the money for everyday expenses if they lost their jobs. Furthermore, 58% believe they would contribute more if their accounts offered higher interest rates. Overall, 61% of respondents plan to save more money over the coming year.
Expert Advice for Better Saving Habits
Elliot added, 'Now is a great time for people to start making a plan to reach their financial goals, including how they can build in behaviors that will help them save more. My advice is to treat your savings account the same as a bill you pay every month — 'set it and forget it' — and then watch your savings grow over time. With the right tools and awareness, saving doesn't just prepare you for emergencies – it will help you build for the future.'
