First off you are simply wrong about lack of choice. You do not have to buy your phone from your carrier. And even the carriers offer plans and phones that are not tied to each other.
You do not pay 20 % more for an iPhone buying it on a plan. I am maybe paying 100 more ( depending on when i upgrade ) dollars over the time i own my phone than i would if i buy the phone and a plan separately . And that is on an 1100 phone.
Also most people get a better rate of return than .5% on money they have invested. I own a company, so money funnel into my company pays double digits , but a lot of people are getting over 5% in stocks , bonds , etc.
Money in savings is liquid. Liquidity offers a financial safety net that has a value in and of itself. A person with a low interest debt ( at or just above inflation ) and the same amount of money in the bank ( or even in stocks ) is more financially secure than one without those things. So it is smarter in many cases to keep your emergency savings and finance a purchase.