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Despite low returns, traditional savings accounts still popular
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Savings account interest rates are nothing to write home about, but they remain popular. Here's why, as well as some alternatives to conventional savings. - photo by Jeff Wuorio
Heres a little math experiment. You have $1,000 you dont need for the next year and you sock it away in an investment earning a modest .95 percent return. A year passes and you pocket $9.50 in earnings.

Many consumers might find that payback laughably low, but thats the neighborhood youre in with many savings accounts.

While savings accounts have been a longstanding staple of American consumer finance, the paltry performance of savings accounts raises the question of whether they have become obsolete and, if not, how consumers can best use them as part of an overall financial program.

The purpose of a savings account is not to earn a high rate of return, said financial planner Martin Hurlburt. It's to be there when you need it for all the standard things like emergencies, but also for vacations and Christmas.

The money supply

Banks and the banking public have come a long way and not always for the better. An article in a May 1960 issue of Life magazine titled Our Flashy, Lovable, Open Handed Banks details opulent architecture, over-the-top company parties (a New York City bank is seen holding a Christmas ice show in its lobby) and drive-up tellers handing out goodies to the dogs while conducting business with their owners.

Savings accounts were just as generous. In 1957, savings were paying about 3 percent interest; by the mid-1980s, passbook savings accounts returned a whopping 5.75 percent.

That banking Shangri-La didnt last. These days, interest rates of 1 percent are heralded as high. Rates well below 1 percent are commonplace.

Falling bank profits, as well as historically low interest rates, are two of the causes of paltry savings account performance. The near 6 percent return on savings accounts in the 1980s may seem astronomic today but, with 30-year mortgages in the neighborhood of 12 percent, banks were still making money.

Savings rates are subject to monetary controls instigated by the Federal Reserve System, explained Charles H. Green, author of The SBA Loan Book. When the Fed wants to tighten the money supply, they raise interest rates charged to banks, causing banks to have to compete for depositors as a result, (savings account) rates rise. When the Fed want to expand the money supply, they ease rates theres more money in circulation and banks lower rates paid on deposits.

When you need it

With interest rates not much higher than the return of keeping the cash under a mattress, it would seem that savings accounts have gone the way of spats and rumble seats.

Hardly. The total value of domestic savings accounts was about $2 trillion as of the third quarter of 2014, according to the Federal Deposit Insurance Company, the federal agency charged with guaranteeing the safety of bank depositors accounts.

That, say financial advisers and others, shows consumers continue to be lured by the promise of downside-free returns, no matter how skinny.

The prospect of getting something for nothing, for many investors, is simply too irresistible to ever pass up, said Syracuse, New York, financial planner Joel Redmond.

But safety just for safetys sake isnt the only enticement. While offering little potential for growth, savings accounts remain a suitable destination for a bedrock of financial planning an emergency fund, a readily accessible cache of cash for unexpected financial obligations.

While savings accounts seem obsolete due to the low returns, we do think there is still a place for them, said Jim Wright, chief investment officer at Harvest Financial Partners in Paoli, Pennsylvania. We think individuals should hold anywhere from six to 12 months of expenses in a safe accessible place as an emergency reserve. These funds can be used if there is a job loss or a major unplanned expense, like your furnace dies in the middle of the winter. It will not produce much, if any, income, but it will be there if you need it.

Technology has also helped savings accounts survive in spite of modest interest rates. By setting up an electronic exchange to feed a savings account on a regular scheduleoften from checking or some other similar account consumers can use savings accounts to automatically build up a completely safe stash, often for a specific goal.

Other options

Security and accessibility aside, the prospect of earning 1 percent or less on savings can cause even the most safety-conscious consumers teeth to gnash. That can prompt a search for anything that may beat savings account performance without completely throwing safety to the wind.

One possibility is online savings accounts. As the name implies, these accounts are available via the Internet. Their biggest plus is higher interest rates hovering around 1 percent or so, slightly better than those offered at the brick and mortar bank.

There are other pluses. Since there are no physical branches to maintain, many online banks charge lower customer fees or eliminate them completely. Another advantage is constant access, making 24/7 banking accessible to anyone with a computer and a modem.

But there are drawbacks, primarily relating to access. While account holders can simply visit conventional banks to deposit or withdraw funds, things can be a good deal slower online. For instance, deposits require either an electronic transfer or, failing that, a snail mail check. That can limit how quickly consumers can use funds in an account.

Certificates of Deposit offer another option. Basically a savings contract, CDs also earn slightly better rates than conventional savings (as of mid-February, a one-year CD was somewhere just above 1 percent interest.) Investors willing to commit to a longer term such as five years can enjoy even better returns (roughly 2 to 2.5 percent).

There are caveats. CDs offer limited liquidity once you buy one, youre committed for the stated term or else penalties for early withdrawal apply. Moreover, if youre hankering for returns in the 2 percent-plus range, plan to keep your money locked up for up to five years.

One relatively new option is peer-to-peer lending. Offered through online destinations such as Lending Club and Prosper, these involve lending money to other people, with the interest payback geared to the level of risk assigned to individual borrowers.

The biggest plus is return. Relatively low risk loans are reportedly earning 5 to 7 percent, with higher risk arrangements paying even higher. On the downside, peer-to-peer platforms arent FDIC-insured, meaning you lose any money invested if the company fails. Additionally, theres always the risk of a borrower defaulting on a loan payback.

Still, savings accounts soldier on perhaps, in large part, due to the psychological comfort of one thing that remains safe in a financial world ridden with pitfalls. And, as Wright added, hope springs eternal: Finally, when rates once again rise, you might actually earn a little on your money.
Its toxic: New study says blue light from tech devices can speed up blindness
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A new study from the University of Toledo found that blue light from digital devices can transform molecules in your eyes retina into cell killers. - photo by Herb Scribner
It turns out checking Twitter or Facebook before bed is bad for your health.

A new study from the University of Toledo found that blue light from digital devices can transform molecules in your eyes retina into cell killers.

That process can lead to age-related macular degeneration, which is a leading cause of blindness in the United States, according to the researchs extract.

Blue light is a common issue for many modern Americans. Blue light is emitted from screens, most notably at night, causing sleep loss, eye strain and a number of other issues.

Dr. Ajith Karunarathne, assistant professor in the UT Department of Chemistry and Biochemistry, said our constant exposure to blue light cant be blocked by the lens or cornea.

"It's no secret that blue light harms our vision by damaging the eye's retina. Our experiments explain how this happens, and we hope this leads to therapies that slow macular degeneration, such as a new kind of eye drop, he said.

Macular degeneration is an incurable eye disease that often affects those in their 50s or 60s. It occurs after the death of photoreceptor cells in the retina. Those cells need retinal to sense light and help signal the brain.

The research team found blue light exposure created poisonous chemical molecules that killed photoreceptor cells

"It's toxic. If you shine blue light on retinal, the retinal kills photoreceptor cells as the signaling molecule on the membrane dissolves," said Kasun Ratnayake, a Ph.D. student researcher working in Karunarathne's cellular photo chemistry group. "Photoreceptor cells do not regenerate in the eye. When they're dead, they're dead for good."

However, the researchers found a molecule called alpha-tocopherol, which comes from Vitamin E, can help prevent cell death, according to Futurism.

The researchers plan to review how light from TVs, cellphones and tablet screens affect the eyes as well.

"If you look at the amount of light coming out of your cellphone, it's not great but it seems tolerable," said Dr. John Payton, visiting assistant professor in the UT Department of Chemistry and Biochemistry. "Some cellphone companies are adding blue-light filters to the screens, and I think that is a good idea."

Indeed, Apple released a Night Shift mode two years ago to help quell blue lights strain on the eyes, according to The Verge. The screen will dim into a warmer, orange light that will cause less stress on the eyes.