Over a decade ago, the Fed implemented ZIRP – Zero Interest-Rate Policy – to stave off economic collapse. As such collapse looms over us more than ever before, how does one generate money based on a savings account alone? FinTech startup Save is trying to provide a novel answer, by preparing to offer an FDIC-insured savings platform that actually invests.
Interest Rates Have Fallen on Hard Times
Since the 2008 financial crisis, created by banks loaning money to people with dubious payback power, savings accounts have become an outdated concept for most people with modest means. Due to the Federal Reserve constantly pushing for ZIRP to keep the economy afloat, only people with considerable stockpiles of cash could hope to generate money based on their interest rate alone.
As this graph illustrates, it was not always like that. In the past, you could’ve lent your money to a bank by opening a savings account and enjoy a hefty interest rate increasing your money year by year.
Because our societal institutions effectively crashed the economy due to COVID-19 fears, saving money is and will become ever-more important. Most people may no longer expect to earn a return on their savings given the near-zero interest rate, but FinTech is always coming up with novel solutions to an ever-changing economic environment.
Save Aims to Automate Investment Finance
Simply put, the FinTech startup – Save – founded and led by Michael Nelskyla, combines FDIC-powered insurance with machine learning. The platform transforms a simple savings account into a profitable savings/investment platform without having to worry about losing the initial deposit.
Instead of relying on the Fed-made-obsolete interest rate, Save harnesses your deposit to invest in a variety of ETFs: real estate, commodities, bonds, and stocks. In essence, the platform seems to have taken a page from the top robo advisors that bring automation to investing — yet with added security through insurance.
As of the time of writing, Save is working out the details with banks regarding the proper insurance, and has already partnered with Apex Clearing, a FinTech company specialized in wealth custody and management. Here are some of the features Save offers:
Depending on market health, the average return is around 3.18%, paid on an annual basis, and FDIC-secured up to $1 million per account.
If the customer withdraws prior to annual payment, the return is lost.
Minimum deposit is $1000.
You can receive an additional $1000 through their referral program.
Expected to implement a debit card soon that gives you $1 of extra investment opportunity for every $1 spent.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.