Help for Savers

Small depositors get more

When it comes to saving money, affluent people get a break. Those who put $10,000 or more into six-month money market certificates can collect interest at roughly 9.5%, while small savers are limited by law to earning only 5% from commercial banks and 5.25% from savings institutions on their passbook accounts. Last week federal banking authorities proposed new measures to redress this imbalance and encourage saving.

One of the new proposals will be an eight-year "rising rate" certificate of deposit in amounts as low as $500. The interest will start at 6% (6.25% in savings banks) and rise gradually to 8% (8.25%) over five years; a saver who leaves $500 on deposit over the full eight years will get $386.17 in interest, vs. $244.06 in a regular 5% bank account. Savers will also be able to buy a five-year certificate pegged to the average five-year Treasury Note rate, currently 9.2%; interest on the new certificate will be 1.25% less than that rate, or 1% less if bought at a savings bank. In addition, the $1,000 minimum for certain high-interest certificates of deposit will be cut in half or, in some cases, dropped altogether. Finally, regular savings accounts will pay an extra half percent bonus on the minimum balance held over twelve months.

The Gray Panthers, a group of aged activists, have been lobbying long and hard for higher interest for small savers, and have publicized their campaign through buttons and bumper stickers bearing their wry slogan: "Savings may be hazardous to your wealth." They have a point. Just to keep even with double-digit erosion, the head of a family of four who earns taxable income of $20,000 would have to be paid interest of 11.25% on his passbook savings, or more than twice the current rate.

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