This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool’s Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.
I must confess to a new habit: I collect discarded ATM receipts. It all started when I walked by the bank in the building next to Motley Fool Intergalactic Headquarters, and found one such receipt blowing in the wind. I was shocked by how little the person had in her/his bank account, and how much she/he paid to get what cash was available.
To see what I mean, check out the stats on seven receipts I’ve recently picked up:
| Withdrawal | ATM Fee | Account Balance |
|---|---|---|
| $60.00 | $3.00 | $72.79 |
| $40.00 | $0.00 | $709.02 |
| $100.00 | $3.00 | $8,973.53 |
| $400.00 | $0.00 | $431.31 |
| $20.00 | $0.00 | $301.73 |
| $20.00 | $0.00 | $54.92 |
| $20.00 | $3.00 | $48.04 |
What comes to your mind when you look at those numbers? Here’s what comes to my mind:
- Some people have very small bank accounts. Only one of those accounts is substantial. Of course, this may not be the only bank accounts these people have. But if it is… well, these people are living on the financial edge. I suspect they have other accounts with much bigger balances: their credit card accounts.
- Some people are willing to pay a lot to get their cash. Three of these people paid three bucks. In the case of the last person, that $3 ATM fee was 15% of the withdrawal and 4.5% of the entire bank balance.
- Some people don’t give a hoot about polluting. I don’t dig through the garbage for these receipts; they all have been thrown on the ground. Some people take the time to rip them up and then throw them on the ground (even though there’s a trash slot under the ATM). I have considered the possibility that the receipts I collect aren’t indicative of banking customers in general but a self-selecting sample — specifically, people who have little regard for their community also have little regard for their own personal finances. Just a theory…
What’s your ther-money-stat?
Here’s another theory I have: We each have an internal level of financial stasis that involves having a certain amount of money in the bank, a certain level of debt, and a certain amount of each paycheck going to savings — an internal “ther-money-stat,” if you will. If we somehow find ourselves in a better situation than our regular level of financial comfortability, we turn up the spending. Perhaps it’s due to a raise, or a bonus, or an unexpectedly large tax refund. But as historian C. Northcote Parkinson wrote, “Expenses rise to meet income.”
On the flip side, there’s a level at which we freak out. Our financial condition drops below our internal ther-money-stat, and we swear off restaurants, movies, vacations, and anything but the necessities. (By the way, a difference in these internal levels is one of the biggest sources of conflict between couples.)
If I had just a few hundred dollars (or less) in the bank — as is the case for plenty of people, according to the ATM receipts I pick up — I would immediately cancel the cable and the cell phone, turn down the heat and layer up the sweaters, and likely get a second or third job. I would barely be able to sleep with that little in the bank.
Of course, I don’t know the stories behind these receipts, but my guess is that these folks have a much lower ther-money-stat than I do. The question is, can it be changed? Can someone who is willing to pay $3 to withdraw $20 from a $71.04 bank account turn into someone who would not rest until there’s three to six months’ worth of living expenses in an emergency fund?
I think it’s possible; you GRS readers have told us before what got you to become fiscally fit. But I bet it’s not easy.
Season’s depletings
I suspect that many of us (myself included) tend to get a bit self-righteous when we see evidence of people making bad financial decisions. However, I can’t help — especially at this time of year — to also feel sorry for these low-balance bank customers. There are plenty of people who are experiencing tough times due to no fault of their own. I can even conjure images of parents withdrawing from their measly accounts to buy gifts for their kids. (I’m a sucker for a holiday sob story.)
So whatever the reason for these folks’ modest bank accounts, here’s to hoping that they — and you — have an enjoyable holiday season, and that 2010 brings bigger bank balances to us all.
This article is about Budgeting, Psychology
SEARCH FOR RECENT ARTICLES
To second several minority commenters here (Amanda, ebyt), why risk a super-low balance in your checking account? Is the extra few % interest worth the peace of mind? I won’t argue with the budgeters though, do what works for you.
Note also that *this* crowd is not a statistically accurate view either, by any means. Most people here:
(a) had bad money habits in the past, and are keenly aware of them
(b) possess above average understanding of savings and emergency funds
(c) actively use techniques to get the most out of their money (high yield savings, frugality, etc.)
I agree with JD (from my statistically inaccurate sampling of people I know) that many people live very close to the edge.
To assume that a majority of people transfer most money out into savings for budgeting or yield sounds unlikely… hopefully a fairly significant minority, but I even doubt that based on all the general consumer evidence around me.
On another note: thanks for another year of GRS, JD! You’re helping a lot of people achieve that minority status
loading....
I think the people who are talking about Robert making assumptions from one atm receipt are missing the point that it is just there to jump off into a more interesting discussion.
Robert, on the question of whether people can turn around, I think they can. In my days of mega debt (over $80k all up) I would live pay to pay, my account was always overdrawn to the maximum, I’d switch between my 6 or 8 credit cards to use the $20 or whatever was left on there. But I turned it round, quite successfully.
Now it’s hard to say where my magic point is. I’d say maybe around $10k cash makes me relax. A few months ago we bought a new house and refinanced our investment properties, and the amount of debt and the monthly repayments (if they weren’t rented) put me into terror mode and I cancelled our christmas. But then we got that $10k behind us, and I realised that our budget allowed us to pay everything comfortably even if rates went up by 3%, so I relaxed again (plus I worked out our net worth – debt and account balances are only half the story).
Personally I’ll feel a lot better once we have $30k in a buffer, but I’m also quite comfortable using our credit cards for any temporary setbacks – we never carry a balance and all debt issues are well behind us.
loading....
Ann:
Obviously, checking account interest rates will differ by bank and geographical location. For me, located in Texas, banks are offering up to 5.01%
The following website will show you the best checking account interest rates available in your area: http://www.checkingfinder.com/community-banking
loading....
When I was in college, that’s about what my account look like (except I’m not a litterer) but I knew almost to the dollar how much was in there and never bounced anything. My comfort level is higher, but then again I usually don’t know to the dollar how much is in my checking anymore.
We can assume we know what is going on (something bad), but I would be the first to admit 1 atm stub does not make a complete financial picture.
loading....
JD
Sorry man, but I disagree with your comment #52.
It is nice to think that people will change, but reality says they won’t.
Average is average for a reason. Most people live paycheck to paycheck. Most people have little savings. Most people use credit cards. And most of those people carry a balance and pay interest.
Most people borrow money to buy cars. And Houses. And groceries.
Sure, some have their ducks in a row, and you see many of those people here on your blog, but your readers represent a miniscule percentage of the average population.
The average person will not change. If they did, they wouldn’t be average.
And if everyone somehow got their act together and started getting rich slowly, then no one would be rich at all. If everyone had a million dollars, having a million dollars wouldn’t be impressive. It would be average.
It is noble to think everyone can change. And while that is true that everyone has the ability, most all of them will not.
Take a random sample of 100 people. 5 of them get it. They control their life.
The other 95 let their life control them.
JD. The reason you are getting rich slowly is becasue most other people aren’t.
loading....
My checking account has a maximum of $250 since I keep the bare minimum there for withdrawing cash. However, my overall financial portfolio is in excess of $750,000. So you see it just makes no sense to spend any time drawing conclusions from discarded receipts.
loading....
The Schwab checking account reimburses atm fees.
loading....
I agree that it’s probably a skewed sample… The people who hit the “print receipt” button and then let it float off into the street are probably the same people who don’t keep track of their funds.
loading....
Wow..a ton of assumptions in the post! Some MAY be accurate but as lots of others have pointed out, its pretty silly to assume in this day and age that people who have small balances in their checking accounts are on the edge financially.
I myself am waiting to make a big transfer on January 1st, so I have moved money from an online bank to my checking account (TFSA in Canada, can’t put new money in until January 1st). So my ATM receipt would show zero fees but over $10k in it. But normally it would be just the minimum to keep me from paying any fees plus a few hundred extra for expenses since the majority of it goes to my mortgage and my savings account after each pay day. *shrug*
You know what they say when you assume.
loading....
Speaking of comfort levels, last winter I found out that Mom had $40,000. in a totally non-interest bearing checking account! When I suggested that we explore alternatives such as ING, she asked what if there was an emergency – what if for example, I needed to borrow money from her right away? I told her that if I ever needed tens of thousands in cash RIGHT THIS VERY MINUTE, it would probably mean that I was doing crack and that she shouldn’t give it to me! Since she was afraid that her lifelong bank might “get mad” at her if she opened an ING account, we went right down to the bank and at least moved it into a relatively high interest bearing account. I guess that was some degree of progress.
loading....
My Ther-money-stat’s changed a lot as I’ve gotten older.
Once when I was student (about 20 years old) I had to split-purchase to buy $7 worth of groceries – $3 from eftpos and $4 cash because that was all the money I had. I wasn’t that stressed at all – often really hungry though.
Now I need to save every month or else I panic.
loading....
I don’t keep much money in my checking account. I don’t risk much by keeping it low because I learned how to add/subtract when I was around 3 years old. In other words, I don’t overdraw even if it gets <$1. I have free checking with no minimum.
I don’t really pay ATM fees for many reasons. For one I use a bank that has local branches. If I really needed cash from an ATM I would just go to one of my banks. If I need to access my account I could always use my debit card at POS, which also allows cash without charge. But why would I even need cash? I can’t think of any purchase I make that requires cash. I know this is a never-ending debate here, but I am one of those folks who spends MORE if I take cash out.
My ( U.S.) ATM always asks if I would like a receipt for this transaction.
Most people aren’t well-off financially. A lot of financial columns are written by 6 or 7 figure people making assumptions about the majority of people who barely get by. I think most people, even those with substantial income, are “check to check.” WE know this isn’t ideal, but it’s the norm.
loading....
We don’t have ATM fees in France, but we have minimums.
That is, a friend of mine would look for her bank for hours because this way she could take out 10 euros: the other banks had a minimum of 20 (all banks were like that, if it’s not your own bank, 20 is the minimum to withdraw, if it is, you can take 10).
And you see, she never took more than 10 euros at at time – it was too much for her.
On the other side of the fence, I knew someone who made a comment that he didn’t understand why people would take out any less than the maximum allowed (500 euros). Well, for one thing, that was more than my monthly paycheque, how is that for a reason?
Me, I’d never use ATMs unless I had to shop in a store with a minimum for debit (a lot of them have a 10, 15 or even 20 euros minimum for debit, in which case I pay with cash).
I disliked cash, that you can’t track, that you can lose, that people can steal from you.
I lived on cash for around 6 months using the envelope method, but I’m still relieved to go back to debit. And since here there usually isn’t a minimum for debit, I just don’t take out cash ever.
This being said, if I did, my balance would be fairly low, as my money is taken into my savings account automatically, and only the essential is left in the chequing account (same as others here)
loading....
Self righteous? Really, Robert?
I talked about the superiority felt by personal finance practitioners in my blog and you have proven my point. I feel the same way myself. Cheers 
.
Like many of the comments here, I agree that many people these days transfer a bulk of their money to an interest-yielding account, rather than keeping it in the day-to-day account. To say that they are on the brink of bankruptcy and use the money for reckless spending is… well, a reckless generalisation.
You won’t like how much money I leave in the checking account at all time ($100-$200) but I have 2 years worth of living expenses for 2 people in my savings account. I would feel uneasy if I only have 4-figure fund left in my savings account.
loading....
In a nutshell, here is my current comfort level.
Living debt-free (besides a house note and maybe one car note).
Six months worth of an emergency fund.
Enough expendable cahs to do what I want. I know this last one is relative, but its my current goal
loading....
My main checking account currently has $8.43 and the linked Savings account has just under $1,800.00.
My other “savings” account has in excess of $15k spread between Money Market and CDs. This account is shrinking a bit as I’m using some of this money to pay down my Mortgage.
loading....
I don’t pay ATM fees nor would I put myself in that situation, but want to point out that the fee charged by the banks is there for a reason. It is a fee for the convenience of accessing your money at any time in a convenient location. Banks pay maintenance on those machines, and someone to service the thing at least once a day (I reasonably assume). The fee may be high, but the alternative is to have to go to your bank during busineess hours or not be able to access your money when you need/want it. Convenience comes at a oost.
loading....
First time poster here, after reading for many months. I’ve got accounts at 2 banks, and depending on which bank you’s see my ATM from, you’d get a different story. One of the first posts I read here about 6-8 months ago was concerning high interest checking accounts. After reading the article I promptly opened an checking account with NBRS with a 4.26% rate. THANKS!! It is not down the street from me, but I have business in which I pass by 3 branches a few times a month so it works great for me. I now keep every penny I can scrounge together there, and use my closer bank just occasionally.
If you found a discarded ATM receipt, (which you wouldn’t cause I’m a anti-litter freak, lol) I may have a $2 fee for using the ATM to get money from my NBRS bank. I get reimbursed for that fee, so I don;t sweat it, but I would have to be be desperate for cash to actually be charged for an ATM fee.
That said, from my personal experience with friends, I would say the majority of those discarded ATM receipts do represent people living day to day, and blindly paying fees.
As far as people changing there financial habits..it’s absolutley possible. I’m slowly working on helping a friend of mine. I found out he was deliberately paying close to $50 extra a month on late fees to his mortgage. I freaked on him, lol, and he basically told me they live month to month (on a decent salary) and that once he got behind he just settled into that routine. I convinced him to take some extra money he earns in a 2nd job, get paid up, then he will save close to $50 a month. He did that, and thanks me every month now that he is back on track. I can also see the financial wheels spinning, so I think he is starting to see the big picture. I’m hoping anyways!
loading....
As I scanned through the messages it seemed like most people keep far more of their (liquid) money in a savings account. I define liquid money as anything used for bills, short term savings and an emergency fund. I am assuming that people move money from one account into another in order to receive a higher ROR.
I’m curious, if a high interest checking account, I believe the one referred to had a 5.01% interest rate, offers a higher interest rate than a money market or a savings account, does it benefit someone to move money out of that account into another account that pays a lower interest rate?
I understand the psychology of keeping a separate savings account if it limits cash spending but is it really advantageous if you’re receiving a lower interest rate? Specifically, what is the advantage to keeping $200 in a checking account that pays 5.01% interest while keeping $10,000 in an ING account paying 1.3% interest?
I am new to this site and am trying to understand why (based on previous posts) so many people seem opposed to keeping “liquid” money in a checking account. If my goal is to maximize my ROR on “liquid” money it seems like I should put my money where it will receive the highest interest rate.
Regarding the transaction slips from the ATM. I always take the paper receipt as confirmation and/or proof of the transaction. I shred it at home later on.
I wouldn’t litter and I certainly wouldn’t give anyone the opportunity to have even a small glimpse into my finances by leaving my transaction slip behind.
loading....
You could make several assumptions with picking up these receipts. Granted, some of these people may be finacially disadvantaged and would live from payday to payday, however I don’t think that you would find shrewd money people keeping large sums of money in a standard savings account.
loading....
I always choose the ‘no receipt’ option, but if I did get a receipt it would look a bit like these, minus the fees (most ATMs in the UK don’t charge fees, at least not for my cards, and I wouldn’t use the ones that do unless I was totally desperate).
As others have said, I’m not sure that looking at people’s receipts really gives an accurate indication of their financial lives, although I do agree that littering could be associated with disorganised finances.
I agree with the idea of a financial thermostat – I keep a low minimum balance (about £100 – £200) in my main current account since most of my money is used for bills or savings, although this amount is lower than I’m really comfortable with. My business is still getting off the ground, so my income is pretty low right now, but as it increases, the balance I maintain will rise about 10x to match my real financial thermostat.
When I was younger and a student, I lived very close to the edge financially (permanently in my overdraft, no savings to speak of) and it didn’t really bother me. I changed my attitude after getting into credit card debt, and later having a ‘light bulb’ moment, and am definitely much more risk-averse these days.
loading....
@Paul #119
We currently have 3 savings accounts and 2 checking accounts. Both linked checking accounts have lower rates than their savings counterparts. Currently credit the local credit union savings is offering the highest interest rate, though not by much. If one of the checking accounts had a 5% interest I would definitely move the liquid assets to it. However, I’m done chasing 3-6 month promotions to increase interest for a little while. At some point the complexity just isn’t worth it.
loading....
Wow, such conclusions you’ve made by finding 7 receipts. I have a theory too. Since the bank is right next to Motley Fool Intergalactic Headquarters, the receipts are naturally from Motley Fool employees. The people you feel so sorry for are your colleagues.
loading....
Hello there,
I haven’t sifted through all of the other comments to see if this was already covered but I wanted to bring up a few points.
The first two assumptions made about other people’s habits seem like a pretty big jump to conclusion in my opinion.
Concerning the assumption about people having very small bank accounts (and the implication that their credit card debt is ‘much bigger’) – I personally only keep about $10 or so in my regular checking account. When I get paid every other week, I take out any bills that need to be paid as well as other forecasted, and somewhat irregular, expenses (groceries, gas, etc.) then I take everything that’s left and move it on over to ING for savings. With all the push of using online banks, I’m suprised the author didn’t consider this.
Now to the how-could-anyone-pay-so-much-money-to-get-to-their-money assumption. Since my regular bank (a state employee credit union in a state I no longer live in) has only a few branches they reimburse atm fees (up to $4 a month for my bank but I know this varies – some even cover all atm fees!). Since I know I’m getting that money back at the end of the month I have no problem paying $3 to get the $40 that I need to get something I really want (depending on if I have $40 in that account to begin with, see above).
Anyway, I’m not sure if this helps evolve the authors perception about other people’s habits but I hope so.
Thanks for listening,
Carly
loading....
Why is every anecdote on this site an excuse for self-righteous preaching?
Just because $700 is peanuts to you, that’s plenty to most people. For the millions of disabled and elderly Americans, that’s more than a month’s income/expenses (and if you’re on Medicaid you can’t have more than $2000 saved anyway, so you have to make sure to spend it). For any low-income person that might be a perfectly reasonable buffer to have in a checking account.
I balance my checkbook regularly so that at the end of the month I should only have about $500 in the account, even though it fluctuates up to about $6000 in the middle of the month.
If you actually want to educate people, stop guessing and judging and bring some actual facts and information to the table.
loading....
I keep more than $10 in my checking account. I am too lazy to move money all around just to get a measly 2% per year on it. If you keep an average balance of $2000 – that’s only 40 bucks a year, not really worth worrying about in my opinion. Of course the numbers would scale based on income and assets – but 2% is never going to make anyone rich, so unless you have a lot more time than money…
loading....
Unfortunately I can’t access my bank account as whenever I do the ATM simply erupts into flames and the city block loses power…probably has something to do with the ridiculously high amount of money that is in my account.
As for the article, careless people throw out their bank receipts and when you act a certain way in one scenario chances are you will act the same way in another scenario. There is a lot of extremely private information on a banking receipt and most people I know guard them viciously, clearly these thrower-out-ers simply don’t care.
Then again, if my huge sum could actually fit on to a piece of paper then I would make millions of copies and throw them all around the country just to show people how awesome I am. I’m cool like that.
loading....
Is my bank the only responsible one that doesn’t print much info on a receipt? They know they can blow in the wind or misprint so it has my name, last four digits of my account, and the transaction information. You’d get more personal info by googling me.
and Sarah @125, I think people are commenting more on the ~$50 balances than the $700 balance.
loading....
My Ther-Money-stat is set to about $20K for my checking account, because my credit cards are automatically linked to the bank account. It’s a convenience thing.
Reading through the comments though I have way too much money ($650K) sitting around in terrible interest bearing accounts, collecting nearly zero or less than 1%. Have another few hundred K in ING collecting a whopping 1.5% a year.
I guess for a spread of less than 1% I’m ok to let the money sit, so long as it doesn’t get lost by a bank failure…
Saving up to buy a nice house in cash but the way the gov’t is trying to prop up the housing market I may have to wait until 2012 to make a move…
-Mike
loading....
You couldn’t collect my ATM reciet because I haven’t used one since college (1979). I overdrew my account once and threw out the card!
If you did see my checking balance you would assume that I am not doing so well. I don’t leave more than monthly allowance in my checking and that gets withdrawn bi weekly.
BTW- I LOVE this type of article. It makes me think. Thanks for having him guest post!
loading....
I’m just glad to hear that I am not the only one picking up ATM receipts!
http://eliminatethemuda.com/2009/08/atm-fees-are-ridiculous/
Based on your findings though I think you must also take into account where you find the slips. If they are from a 7-11 in a poorer part of town you may see something very different than on the ATM slips outside of the Fool HQ!
loading....
For whatever its worth, I pay no heed to ATM fees whatsoever, and am willing to accept any and all because (a) my bank never charges me one, and (b) my bank refunds the fees changed unto me by other ATM owners.
loading....
Very interesting!
Although many financially savvy individuals do keep low balances in their checking accounts (like I do), I’m sure most of these financially savvy people are also like me and never use an ATM unless they take out a large enough chunk to make it more worthwhile ($300 or whatever the daily max would be).
Thus, these people trying to get a $20 bill out of the ATM probably don’t have any more money than what you see on the receipt. Very sad.
A bit off topic: I haven’t used an ATM in years. I put all my spending on rewards credit cards and pay them off each month. I pick up cash in person at a branch of my bank that is right next door to where I work. Ironic, eh? ATMs were originally touted as a way for banks to save money on tellers. I used ATMs exclusively for my banking from sometime in the 1980′s until about 2002. But the high ATM fees and the usual inability to reliably check my bank balances at an ATM now makes me avoid using ATMs. I hope banks never catch on and start charging fees to use the teller!
loading....
@Shara (#58)-
Some of these posts probably sound defensive because the article is self-righteous. Since when was this blog about judging people?
loading....
Addressing the littering issue, I’ve come to some conclusions; While walking along roadsides, the litter I see is largely fast-food wrappers. Seems to me that if someone disrespects their body enough to eat this stuff on a regular basis (I’m not completely bashing fast food, I eat it too, but on occasion), they probably won’t have much respect for their environment either. The earlier posting (#5) about people throwing garbage out their front door into the gutter outside their house made me think of that, seems a matter of lack of respect for self overall. Sad.
loading....
I didn’t read through all the comments, but I wanted to add my own fun fact. I once found a receipt in Wawa (a local gas station that has free withdrawls) with $351,592 as the balance.
Likely this person just sold a home, or was about to buy one, but I thought about the implications for awhile. What if they really did just keep that much money in their checking account? Crazy.
loading....
I just went to the ATM machine last night and a receipt was left there. The account had nearly $64,000 sitting in it. What are they thinking? Wells Fargo checking accounts earn next to nothing in interest.
loading....
Wow. Such smugness.
I know many of you commenting are obviously in great financial shape, but the tone on these posts is down-right depressing.
Personal circumstance: I don’t always have a lot of money left over at the end of each pay. I don’t have an emergency fund. I do have a credit card, which has about $1000 dollars owing on it and I’m working on dropping. I have a mortgage.
I also have a partner who can’t work (physical disability) and a daughter in private school (too smart for the public school system to cope with – definitely unexpected expense). I have a good stable job.
Does it bother me that I don’t have an emergency fund? Sure does. I know I am living with an element of risk. But I am doing the best I can in my circumstances and am reading blogs like this to see if I can do more to improve the rate I improve my families financial circumstances. We don’t want to downsize our house to fix the school fees problem because our house is built to suit my partner’s disability (not an easily found thing).
Don’t judge people by their bank balances – you want to help people with their financial health and knowledge? Great – start by being a bit more openminded.
(I know I am taking personally some of the comments, but I finding that improving my own financial lieracy apparently means my self esteem gets routinely beaten up..
loading....