More than Half of Consumers Don’t Understand Where to Keep Their Savings
Lack of knowledge about high-yield savings may cause consumers to keep money in lower-yield accounts they wrongly see as safer
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- Written by Banking Exchange staff
Many US consumers don’t fully understand their financial accounts. For example, more than half (52%) don’t know that a high-yield savings account is a good option for emergency savings.
A survey by Santander Bank found that consumers might confuse higher-yield bank accounts, like high-yield savings accounts, with investment accounts that carry a risk of losing money.
For example, only 35% understand that high-yield savings accounts are safer than accounts offering investments like stocks and bonds, and just 42% know that high-yield savings accounts usually have steady returns each month.
This lack of knowledge of high-yield savings offerings could be creating a misalignment between consumers’ financial goals and where they keep their money, leading savers to keep their money in lower-yielding accounts that they incorrectly view as less risky, according to the report.
Swati Bhatia, head of retail banking and transformation for Santander Bank, said: “During times of volatility, it is even more important for consumers to be equipped with the information they need to make sound financial choices. Consumers are worried about uncertainty, and they are confused about what accounts best align with their goals.”
The report also found that Americans’ confusion goes beyond savings accounts as they often don’t fully understand the risks of investing, which can expose their savings to market ups and downs.
More than four in 10 (43%) do not realize accounts with various investment options involve risk of loss, including 13% who do not believe there is any risk and 30% who do not know.
Meanwhile, just over half (54%) understand that the stock market is usually unpredictable from month to month, with ups and downs that can bring strong gains over time but also short-term losses.
