Once upon a time, in what seems to be a faraway land, individuals had savings accounts and those savings accounts actually earned interest. People were prosperous and happy; money seemed to flow out of their homes and investment accounts like an endless river. But evil recession reared its ugly head and gobbled up most of the savings in the land, and banks crumbled under the weight of a flailing economy and the flow of money from the houses and investments dried up. Most of the good people of the land lost their jobs and their homes, and those who still had a little purse full of coin looked for places where their coins would not only be safe from evil recession, but also be fruitful and multiply like they once did.
So the fairy tale goes, and as the end of 2009 comes to a close, many are wondering how this story, this once happy financial fairy tale now gone wrong, is going to end. Americans are earning less than ever before from their savings accounts and investment accounts, and some banks are offering interest rates that seem dangerously close to zero percent interest. Many with a fixed income who have previously lived off the interest on their investments are struggling like never before. This begs the question as to why use a financial bank to hold your money when a piggy bank will give you close to the same return, minus the gas money needed to drive to and from the bank.
The Bureau of Economic Analysis reports that in 2007 the amount of interest earned from personal income in America was approximately 1.6 trillion dollars. In 2009 the amount of interest earned from personal income is looking to be 40 billion dollars less than it was in 2007. And across the board, economists are not predicting that the interest rates on personal savings accounts will go up any time in the foreseeable future. Although these same economists are predicting that the rate of personal savings, that is, the percentage of households actually saving money, should reach an all time high of 8 percent as more and more have come to learn the hard way what happens when you don’t have an adequate cushion of savings to comfort a financial free fall.
No one knows for sure how this story will end: who or what will ultimately be the hero and slay the evil recession. Or what further slings and arrows our savings accounts will suffer. The good people are waiting with baited breath, hoping for a happy ending to our sweet yet sad economic fairy tale.
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