Were Savings Account Returns Ever High?

By in Automatic Saving, Investing | 13 comments

My Savings CD Account Passbook & Links

I’m on a cleaning and purging binge. It boosts  my personal wealth and well being to live in an environment free of clutter (well maybe not clutter free, but with less clutter). The more I focus on what matters most, the better life is.

In my obsessive purging I found some old bank records ready for the shredder.

Records from the late 1980’s and early 1990’s can easily be discarded so I tried to run the whole envelope through the shredder.

But the envelope was too thick to run through the shredder so I opened it up and found an old savings account passbook. For those born after the late 1980’s you may not realize that banks recorded your balance in a booklet, along with the interest rate.

Here’s the record of a certificate of deposit from a Savings and Loan account :

CD Interest Rate 8 %

CD Interest Rate 8 %

I know 23+ years ago is a lifetime for some. But this CD savings account passbook was a reminder that the only constant in life is that things change.

Several decades ago, I would never have believed that savings rates could drop to below 1%.

Granted, inflation was much higher then. In fact, in 1989, inflation ranged from 4.3 to 5.4%. Yet, even with such high inflation rates, the real rate of return on that certificate of deposit was near 3% (that’s over 2% higher than today’s real rate of return).

The point of this information is to be aware that no one knows the future, and the past may or may not be indicative of what’s next.

Even at rock bottom interest rates, everyone needs some cash to access for emergencies, short term spending goals, and day to day expenses. Here are some articles about investing and where to put that short term cash.

Barbara Recommends-Fixed Income and Investing Links

Treasury Bills; A Smart Bet for Conservative Investors by The College Investor-With the stock markets increasing daily, it’s a good idea to attend to the fixed and cash portions of your portfolio. Along with I Bonds, Government Treasury Bills are not a bad idea for your cash. Learn about them here.

Doing the Math on an Online Savings Account by Joe Taxpayer-We all need some ready cash; for emergencies, short term goals; and walking around money. With interest rates in the sub basement, online bank accounts offer a less horrible interest rate. Why not

Asset Allocation of Bonds at Learn Bonds.com. This article delves into one of my favorite topics, asset allocation, and discusses how much of your portfolio should be in the fixed bonds category.

Consumption Smoothing and Your Financial Future at Financial Ramblings. Saving versus spending, the age old question. Just a reminder that we can’t have it all now. Or if we try, we won’t have much in the future.

3 Ways Your 401(k) Lowers Your Tax Bill at the White Coat Investor. As a long time contributor to any tax advantaged plan around, this article underscores why to invest as much as possible into your workplace retirement account. And if possible, invest in a Roth or Traditional IRA as well.

Safeguarding Your Asset Allocation at the Oblivious Investor. Stick with the asset allocation you decided upon and don’t do a lot of trading and rejiggering. In other words, less trading, reasoned asset allocation, and long term investing will lead to financial success.

Six Important Year End Portfolio Performance Must Dos at the Jemstep Blog. It’s that time again when investors review their portfolios, sell holdings to harvest the tax losses, and take actions to cut tax bills and maintain their portfolios. This article offers some handy reminders.

23 Financial Experts Share Their Best Investing Secrets  at Investor Junkie. Investors with varying ranges of experience share their tips and secrets. Even if you think you know it all about investing, you might find a nugget to boost your wealth.

1%-A Small Number with Big Implications from The Chicago Financial Planner– Boost savings by 1% and notice the outsized impact of compounding. Time in the markets will compound your returns and even a 1% increase can yield a big return.

What is the highest return you have ever received on a cash investment? Today, where are you looking to boost your cash returns?


  1. That’s a blast from the past! 8.44%? Sign me up! You shouldn’t throw the passbook – keep it Barb!


    November 28, 2013

  2. I earned around 18% on Treasury Bonds in the early 1980’s. Inflation was out of control and rates were ridiculous!


    November 28, 2013

  3. I worked as a commercial lender and branch manager for NCNB (now Bank of America) and remember those high rates. I also remember updating passbook savings accounts, though we were at the tail end of that. Some older customers still brought their books in, so we did it as a courtesy.

    Betsy @ ConsumerFu.com

    November 29, 2013

  4. This is a bummer that these days have come and gone. It would be nice to have some more dependable savings vehicles, you are right the only constant is change.


    November 30, 2013

  5. @Moneycone-Definitely, I’m keeping it for a souvenir. And I did not appreciate the return when I got it!
    @Krantc-If only we knew the future back then. Buying 30 year government bonds would have been a perfect investment at the double digit interest rates. That’s why it is so important to understand the financial history and context.
    @Betsy- I sold real estate in the early 1980’s with mortgage rates in the double digits. I can’t believe I actually sold quite a few homes and condos with those stratospheric rates.
    @John- Just wait, over time rates will rise.

    Barbara Friedberg

    December 1, 2013

  6. I vaguely remember seeing my first savings account accrue interest around 6+% in the early ’90’s. Things definitely change – for the worse or better depends on your outlook in life. 😉

    Little House

    December 4, 2013

    • @Little House- W didn’t appreciate those high returns when we had them, now our cash returns nothing!!! Even taking into account inflation, the real returns were better in the 1980’s and 90’s.
      @Money Saving-Just a small word of caution, the stock market returns are quite volatile. Expect lower stock market returns some time in the future.

      Barbara Friedberg

      December 4, 2013

  7. I wish we could return to those days! Alas, these types of returns are only available from the stock market with considerable more risk 🙂

    Money Saving

    December 4, 2013

  8. I don’t remember the exact interest rates I got from my bank, but I was saving as much as I could when I was in the Air Force back in the Jimmy Carter days. I was only a low-level non-comm, so I didn’t make much, but I had over $4,000 saved after my 4 years in the service. I put that into T. Rowe Price New-Era fund and had over $6k 4 years later when I graduated college. I’m sure a lot of that was due to the high interest rates. I hope we never get back to double-digit inflation, but higher interest rates would be a plus for most savers.

    Bryce @ Save and Conquer

    December 4, 2013

  9. 8%!!! And that was a guaranteed return!

    Even with the inflation of the time, that was a great deal. It is too bad that sitting on cash gets you nothing these days. It makes it very hard to find a balance between keeping things liquid for an emergency and making your money work for you.

  10. I can remember when rates reached 16% in London during the Exchange Rate Mechanism exit engineered by George Soros. Those were the days when you could make a lot of money with virtually no risk. Thanks for the trip along memory lane.

  11. Wow, I wish these rates were here today. I’m a conservative investor and my savings are languishing, can’t wait until rates rise again. I’m disappointed that low interest rates which has revived the economy have really punished the savers for no reason. Great post Ms Friedberg.

    Imran | Xomba

    December 12, 2013

  12. @Michal, Nick, and Imran, I’m a big proponent of US Government I Bonds as the interest rate resets every six months in keeping with the inflation rate. At worst it will protect your cash from the ravages of inflation. The US government also has a brand new product, floating rate notes, which offer the possibility of higher future rates. Check out treasurydirect.gov for more info.

    Barbara Friedberg

    December 13, 2013

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