Jun 26, 2024
Is the average American investor getting scammed? Real estate mogul Grant Cardone believes they are.
“You get money, you work your a– off and then you give it to an institution and forget that it’s there,” he said during an interview with podcast host Lewis Howes. “Wells Fargo is paying you nothing, Bank of America is paying you nothing. You send it to Chase, they're not paying you anything.”
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But is Cardone right — is there evidence to suggest that savers are getting a bad deal?
Are savers getting the short end of the stick?
The interest rate on deposits held at major banks is nearly 0%. Wells Fargo, Chase and Bank of America offer entry-level rates of 0.01% on these deposits.
Given that the Federal Reserve’s benchmark interest rates are between 5.25% and 5.50%, bank deposit rates certainly appear like a bad deal.
A survey of 8.3 million Chase customers by JP Morgan found that the median cash balance in a checking account was around $6,600 depending on income bracket, as of February 2024. That’s a lot of money in aggregate that isn’t earning much interest.
To be fair, these checking accounts are not designed for capital appreciation. Account holders generally use this cash for daily transactions and short-term needs, such as rent and utilities.
High-yield savings accounts currently offer interest rates as high as 5.3% in some instances, according to data from Bankrate.
However, Cardone argued that people are either unaware of better rates or unwilling to go seek them out. “People are unconscious, they don’t know where their money is,” he told Howes.
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His suggestion is to closely monitor your wealth and assets.
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Personal inventory
Cardone said he looks at his cash and investments “every single day.” This helps him take “personal inventory” of where all his money is and what it’s doing. He believes this habit is “non-negotiable” for anyone looking to build wealth.
“If [your account] is zero, look at it until it makes you sick,” he said.
Cardone’s financial philosophy echoes the words of management consultant Peter Drucker, who once said, “You can't manage what you can't measure.”
It’s a philosophy that’s baked into modern corporations and professional investment strategies, as they prepare quarterly reports on all their cash flow, assets, liabilities, income and expenses.
Frequently checking your bank account could help you get a better grip on your personal spending habits and cash flow. The next step is to control your cash flow, minimize expenses and start deploying excess cash into investments that will hopefully appreciate over time.
If you invested $1,000 in a high-yield savings account last year at 5% interest it could have generated an extra $50. However, if it was invested in an index fund that tracks the S&P 500, you could have generated $262 over the past 12 months. Over time, these small gains can add up and make a big difference.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
