If the title of my post seems rash, forgive me, but I’ll make my point and let you decide what you think is best. If you’ve been following along for a little while, you know that I don’t keep a savings account.
The entirety of my savings is placed in an investment account with Charles Schwab. Based on my needs and goals, the money is invested in products of varying safety, typically fixed income products like money markets and bonds.
Am I insane? Don’t answer that…
I just think savings accounts are useless. Okay, fine – I know you think ING is great (who doesn’t?). But I can get the same or better rate of return on a savings product in an investment account. And have one less account to worry about…and…well, here are my top 5 reasons:
1. System Simplicity
I have no idea how some of you can track tens (or even hundreds) of different accounts. I like simplicity. Less is more. Zen.
Having it all in one investment account eliminates the need for a savings account, knocking off one entry from my list.
One login. One statement. One set of transfers. I like it!
2. Opportunity and Options
A savings account, no matter how fancy, does not have options. You get the going rate, and if you don’t like it, you get out.
An investment account has choice. Keep everything as cash. Invest in a money market. Invest half in a money market. Change your mind tomorrow – only invest a quarter. Put 10 percent in stocks, let it play out.
Your life changes – and so do your goals. Doesn’t it make sense that your savings change to match?
3. Removing Temptation
Sometimes savings accounts are much too easy to access. Instant transfers, 3 days at most between institutions. Piece of cake. I can buy X without a problem.
Investment accounts are still there when you need them, but the extra hassle makes you think. You have to sell your investments, wait for things to clear most of the time, wait another 3 days for a transfer.
The money is there in a week, but you probably won’t go through the trouble unless you’re in trouble.
4. Making Investing Not So Scary
There’s something about having an investment account that inspires us to … invest. Many people are scared of investing. Heck, you know what the number one position in my company’s 401(k) system is? Cash. Cash!!
Hopefully, at least the thought that you can invest is enough to motivate you to try it. It’s not only the big, bad stock market, after all…there’s plenty of investment options out there.
5. Onomastics (What’s in a Name?)
Onomastics is the study of names. I find it interesting, because the names or roles we give ourselves (e.g. ‘father’, ‘volunteer’, ‘manager’) are often enough to change our behavior. (One of Stephen Covey’s fantastic principles).
The names we give other things are no less powerful. Think about what it means to invest in your future. It’s an active process. You feel momentum. It sounds like you need to do something.
How about saving for your future? It sounds conservative. Laid back. Passive. To me, anyway…
Having an investment account inspires me to think about what I need to do next, and how I’m going to get there.
Cry Foul!
Okay, let me have it! I know it works for me, but can this really work for most of you as well?
Am I getting it wrong here, or am I ‘on the money?’
Photo by whiteafrican
Fiscal Fizzle 
Perfect! Likewise, I do not use a savings account per se. It is just an abstraction on top of my portfolio. After all, asset allocation is what is important and my portfolio at my brokerage is enough for me to accomplish this.
Best of all, it allows me to increase the exposure to equities (meaning less in cash) when the markets are cheap. And since I do have margin privileges (which I do not much use), in an emergency I have access to cash on par with a bank savings account (almost, my electronic fund transfer takes a day to reach my checking account).
I view my checking account as purely a transactional account. Income comes in and is allocated to mortgage, brokerage, etc.
Put me down for “on the Money” (see end of your post).
We haven’t had a savings account for many years. I too like the simplicity of fewer accounts and I never did really understand the purpose of a savings account. Now I will admit that we have a Money Market account at our investment brokerage that we use for our emergency fund savings and right now it is paying zilch…so I could be wiser.
But I agree with your premise. Well said!