3 reasons to feel better about savings accounts

There's no doubt about it--savers are getting a raw deal.

Public policy since the financial crisis has been aimed at bailing out borrowers, generally at the expense of savers. One outcome has been that rates on CDs, savings accounts and money market accounts have dwindled to near nothing.

However, this week's stock market stumble provided a fresh reminder of why people who have stuck with conservative deposit accounts can count their blessings. CD, savings, and money market rates may be low, but they are firmly in positive territory. The same cannot be said for some other investment choices.

Here are three ways to feel better about savings accounts, just by looking at the recent performance of the following alternatives:

1. Stocks. The stock market took a 2 percent beating yesterday (October 25th), just another dip in a roller-coaster ride that has been enough to give investors whiplash. Of the first 17 trading days in October, 12 of them featured up or down moves of greater than 1 percent. The net result of all this frantic activity? The stock market is down by 0.67 percent so far this year, even after accounting for dividends.
2. Bonds. Bonds are not a great investment in a low interest rate environment. Like CDs, savings accounts, and money market accounts, they suffer from those low rates, but unlike deposit accounts, bonds don't benefit immediately from rising interest rates. Bond prices fall as bond yields rise, and through most of October the trend has been towards rising yields, and therefore lower prices.
3. Gold. Gold may be the last refuge of the worst-case-scenario crowd, but lately it's been writing a pretty scary scenario for itself. Gold has tumbled by nearly 10 percent since peaking in early September, and after a run-up of more than 500 percent since the year 2000, there is plenty of more room for gold to fall.

The performance of these alternatives lately is enough to make people feel better about their savings accounts--if only because misery loves company.

 

 

 

 

 

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