According to research by Pew, roughly 15% or 37 million Americans don’t have a bank account as of 2016. This same research cited that the main reason citizens don’t have an account, is because of overdraft fees, or the fact that they cannot afford to keep their account above zero, resulting in fees.
What I find more interesting, is the fact that most of these underbanked citizens have household incomes of $25,000 or less. This would be expected, as many of them have trouble saving as they pay for general expenses on a monthly basis.
Does it Make Sense to Have a Bank Account?
It’s a funny question to most, of course you need a bank account right? However now that we know there is a percentage of Americans without a bank account, it begs the question, should I have one?
The short answer here is yes and reasoning for it is sound and interesting. Let’s take having your money in cash in your closet as the next best example. You save a few bucks here and there for a couple years, and then one day your house catches on fire. Oh no, your money is gone. Now if that money was in a bank account, it would likely be what is called FDIC insured. The FDIC insures up to 250k in a bank account and will paid it back to its owner if stolen. So as an initial obvious reason, it is much safer to have your cash in an account.
Next, a bank accounts gains interest. This means that you are paid a small fee annually to keep your money in the bank. While I’ll always recommend holding that cash in an investment account rather than a savings account, both are better than holding cash in your closet.
Leave the closet for your clothes and stash your cash at the bank. Better yet, put your cash an investment vehicle that tracks the S&P 500, as this is the best way to build wealth long term.