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​The case of American savers' missing $7.7 billion

For years, the Federal Reserve has kept interest rates low to spur investment and encourage individuals to borrow. But that policy, an effort to boost economic growth after the 2008 financial crisis, has come at a cost for the millions of Americans with savings accounts.

That has been especially painful for people living on fixed incomes, such as retirees. A decade ago, a high-yield savings account with a balance of $25,000 would have generated $1,150.62 in annual interest. Today, consumers are lucky to find accounts paying 1.05 percent interest, which would generate annual interest payments of $263.88, or almost $900 less than a decade ago, according to a study from financial site NerdWallet.

Extrapolated to the national level, that means savings account holders have missed out on $7.7 billion in interest during the last decade, NerdWallet said.

Yet while workers and retirees have had even less of an incentive to sock away money in the low-interest rate environment, they're saving a bit more than they did a decade ago -- about 5.2 percent of disposable income now, compared with 3.3 percent in 2006. Placing that money in a savings account might not be the best choice on a number of levels, NerdWallet banking expert Devan Goldstein said.

"With rates as low as they have been, your savings might not keep up with inflation," he said. "We all need a savings account, but it might actually cost you money to save when you measure it against inflation. That was stunning to of all of us."

Even though Americans are saving more than in 2006, it's still not enough to create the three-to-six month cushion that financial experts recommend. About four out of 10 American households don't have enough liquid savings to handle a $2,000 expense, the Pew Charitable Trusts found in a 2015 study. About eight of 10 admitted they have lower savings than households similar to theirs should have.

Even though NerdWallet found that Americans are saving more than they did a decade ago, Goldstein cautions that the numbers may reflect the considerable gains experienced by America's top earners, whose income growth has far outpaced those in the middle- and lower income brackets.

The first step for most Americans is simply to start saving more, with Goldstein recommending a beginning goal of socking away 10 percent of income, and looking beyond savings accounts for a more lucrative haven.

"It's a reality that people who have fixed incomes do rely on savings accounts. That's something we would recommend against," he said. "Somewhere in the toolkit between savings accounts and an index fund is a low-risk but slightly higher return vehicle."

Those include bond funds, annuities and CDs. Other options to consider are alternatives such as real estate or precious metals, Goldstein noted. Each of these products carry their own risks and may not be appropriate for everyone. Others might limit liquidity, such as CDs, which require investors to tie up their money for a period of time.

"With the Fed evaluating a series of rate hikes, it's possible that savings account rates will go up, and we want to help people to be prepared by having good savings habits right now," Goldstein said.

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