It's Not Easy To Save Money

If you're earning minimum wage, or close to it, it's not easy to save money. Simply putting your money into a savings account can you make you feel like your money is just sitting there and rotting away. Yes, savings accounts give interest. But this amount is so small and negligible, that you barely get pennies on the dollar. It is quite depressing to see a bank statement with over a thousand dollars saved, only to find that you've gained less than a dollar in interest. Money market accounts aren't much better, and usually require high minimum balances.

So what about CDs? It could be considered a downside that you can't really withdraw funds (well you can, but for a heavy penalty). However, there are many different period options now available. You used to have to open a CD for 1 year minimum, but now they are offering CDs with periods as short as 3 months. Depending on the bank you choose, initial deposits aren't that high either. $500 is low enough for the average minimum wage earner to cough up.

But how much would you actually earn? Using very rough and generous estimates, we can use an example of a $500 CD for a 6 month period, at 2% simple interest. 2% may sound very high compared to some national averages, or other saving options; but in reality, it just means that for every $100 you put down, you are only getting $2 back. That means in this example, putting down $500 will only give you $510 in 6 months. $10 sounds great compared to a regular savings account. But what can you do with $10? $10 really isn't much. After taxes, that is just about 2 hours of work for a minimum wage earner. $10 probably isn't enough to persuade someone to go to a bank, spend some time doing paperwork, and then come back after 6 months to collect.

It all seems like too much effort just to save some money. This probably explains why it's so hard for lower income people to save their money. There is little tangible incentive to do so. What is the Average Joe to do?