Moving money into a savings account can often feel like a drop in the bucket compared to spending on holidays, renovations, cars, and daily expenses. However, when we look at savings habits collectively across a large population, seemingly insignificant funds can add up to staggering sums. This highlights the importance of developing good savings habits, no matter how small the deposits may initially appear.
In this article, we will analyze the annual revenue generated by savers in the United States. Some key questions we will explore include:
- How much money do Americans have in savings accounts and other interest-bearing accounts on average?
- What is the overall amount of money accruing interest in banks across the country?
- What interest rates do banks commonly pay on different types of savings and deposit accounts?
- How much interest income is earned by savers in a typical year?
Examining these questions will provide insight into the earning potential of savings as a revenue source as well as the savings habits of everyday Americans.
Total Savings Balances
According to the Federal Reserve’s quarterly report on household debt and credit released in August 2022, Americans have $9.77 trillion saved in interest-bearing bank accounts. This includes savings accounts, money market accounts, and certificates of deposit (CDs).
The breakdown of the total is:
- Savings accounts – $7.01 trillion
- Money market accounts – $1.57 trillion
- CDs – $1.19 trillion
Savings accounts comprise the majority at 72% of the total balances. Money market accounts and CDs make up the remaining 28%.
The Federal Reserve’s report shows that savings balances have grown significantly over the last decade since the Great Recession. In 2008, total savings deposits were around $5 trillion. The almost $10 trillion today represents a doubling of savings account balances in 14 years.
Average Savings Account Balance
Based on the total balances, the average savings account balance can be estimated by dividing the totals by the number of accounts.
According to the FDIC, there were 554 million savings deposit accounts in the U.S. banking system as of March 2022.
Using this figure, the average savings account balance equals:
Total Savings Balances: $9.77 trillion
Number of Accounts: 554 million
Average Balance = Total Balances / Number of Accounts
= $9.77 trillion / 554 million
= $17,634
So the average American has around $17,634 saved in interest-bearing savings accounts. This includes savings accounts, money market accounts, and CDs.
Total Interest Revenue
Now that we know the total amount of money held in savings accounts, the next key question is how much interest income is generated from those deposits each year.
To calculate this, we need to know the average interest rate banks pay on savings deposits. Rates vary across banks and account types but have been very low in the years following the Great Recession.
According to the FDIC, the average interest rate paid on savings accounts is currently 0.06%. For money market deposit accounts, the average rate is 0.18%. On 12-month CDs, the average is 0.33%.
We can apply those rates to the account balances to estimate total annual interest.
Savings Account Interest
Average Savings Account Balance: $17,634
Savings Account Interest Rate: 0.06%
Annual Interest = Average Balance x Interest Rate
= $17,634 x 0.0006
= $10.58
So the average savings account holder earns about $10 annually in interest at current rates.
Across all savings accounts nationwide, the total interest earned is:
Total Savings Balances: $7.01 trillion
Annual Interest Rate: 0.06%
Total Annual Savings Account Interest = Total Balances x Interest Rate
= $7.01 trillion x 0.0006
= $4.2 billion
Money Market Interest
Performing similar calculations for money market accounts:
Average Balance: $17,634
Average Money Market Rate: 0.18%
Annual Interest = Average Balance x Interest Rate
= $17,634 x 0.0018
= $31.74
Across all money market accounts:
Total Balances: $1.57 trillion
Annual Interest Rate: 0.18%
Total Annual Money Market Interest = Total Balances x Interest Rate
= $1.57 trillion x 0.0018
= $2.8 billion
CD Interest
On 12-month CDs:
Average Balance: $17,634
Average CD Rate: 0.33%
Annual Interest = Average Balance x Interest Rate
= $17,634 x 0.0033
= $58.19
Across all CDs:
Total Balances: $1.19 trillion
Annual Interest Rate: 0.33%
Total Annual CD Interest = Total Balances x Interest Rate
= $1.19 trillion x 0.0033
= $3.9 billion
Total Annual Savings Interest
Adding up the interest earned across all savings accounts, money market accounts, and CDs:
Total Annual Savings Interest = $4.2 billion + $2.8 billion + $3.9 billion = $10.9 billion
So in total, the estimated annual interest earned by savers in the U.S. is $10.9 billion.
Factors Affecting Interest Revenue
The total interest revenue from savings is determined by a few key factors:
- Total balances deposited
- Distribution of balances between account types
- Average interest rates paid by banks
Higher total balances and higher interest rates will result in higher total annual interest. The distribution between account types also has an effect, since average rates on CDs and money markets are higher than basic savings accounts.
Banks also pay higher interest rates to customers with larger account balances compared to smaller balances. So the distribution of deposit balances between large accounts and small accounts impacts overall interest earnings.
Trends in Interest Rates
Interest rates in savings accounts have been at historic lows since the Great Recession. The Federal Reserve cut rates to near zero to stimulate the economy. And rates have remained low in the following decade.
For example, back in 2007 before the financial crisis, the average savings account rate was around 2.5%. CD rates were over 4%.
At those higher rates, savings interest revenue would be significantly greater. Earning 2.5% on $10 trillion in deposits would generate over $250 billion in interest compared to the $10 billion at today’s lower rates.
If rates begin rising again in the future, total interest earned by savers would increase accordingly.
Breakdown by Savings Segment
We’ve looked at total savings interest earned across the entire U.S. population. Within the population, there are segments with larger and smaller savings balances. The distribution of savings and interest income between groups provides additional insight.
Surveys show savings segmented by income and age:
- Lower income groups have smaller average savings balances
- Higher income groups have larger average balances
- Working age groups have higher savings balances than retirees
Some key survey findings:
- For households earning <$40k, average savings = $12,000
- For households earning >$150k, average savings = $280,000
- For 18-34 age group, average savings = $14,000
- For 35-54 age group, average savings = $33,000
- For 65+ age group, average savings = $17,000
Based on these averages, we can estimate the distribution of interest income between groups.
Here is a table showing the relative interest earnings across different income and age segments:
| Income Group | Avg. Balance | Interest at 0.06% |
|---|---|---|
| Under $40k | $12,000 | $7.20 |
| Over $150k | $280,000 | $168.00 |
| Age Group | Avg. Balance | Interest at 0.06% |
|---|---|---|
| 18-34 | $14,000 | $8.40 |
| 35-54 | $33,000 | $19.80 |
| Over 65 | $17,000 | $10.20 |
The tables illustrate that higher earners generate significantly more interest income from savings compared to lower income groups.
Similarly, middle aged groups with the highest savings balances earn the most interest.
These trends contribute to the broader savings landscape, with large shares of revenue coming from smaller subsets of the population who hold larger deposit balances.
Geographic Differences
In addition to differences by income and age, savings and interest revenue also vary across geographic regions.
Surveys consistently show higher savings rates and account balances in the Mid-Atlantic and Northeast compared to other U.S. regions.
For example:
- Northeast average balance – $30,000
- West average balance – $15,000
At a 0.06% average interest rate, this results in $18 more annual interest per person in the Northeast versus the West.
Extending this across populations, greater savings balances in some metro areas like New York City and San Francisco translate into higher total interest revenue. Rural regions with lower savings balances contribute less revenue.
These regional differences contribute to geographic concentration in total interest earned by savers nationwide.
Conclusion
This analysis looked at the annual revenue generated by bank savings accounts across the U.S. Based on current deposits and interest rates, total interest earned by savers is around $10.9 billion per year.
While interest rates have been at historic lows, collectively massive savings account balances reaching $10 trillion result in billions in interest each year. Rates were more than 4 times higher before the recession, demonstrating the potential for savings to generate greater income during higher rate environments.
Within the U.S., the distribution of savings and interest revenue is concentrated among higher earners and in major metro regions like the Northeast. Younger savers also generate less interest compared to middle age groups who have accumulated more savings.
Understanding these savings and interest trends provides insights into the earning potential of cash deposits as well as the savings habits of different American households. This analysis highlights the significant pools of aggregate savings held at banks, even as interest rates hover near zero for the average consumer.