Safe Saving Strategies for Today’s Interest Rates
January 30, 2018 |
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How should you invest your money? Should you be aggressive and play the market, or keep it safe and secure in your savings account? It can be daunting to know where, when, and how to invest your money to make the most of your savings. As interest rates and global financial markets shift, the safest places and strategies can seem like moving targets.
Here are some tips to help keep your eye on the prize and those targets in sight.
Why Interest Rates Matter
The Federal Reserve has an important financial tool at its disposal: the ability to raise and lower interest rates. They have this ability as a way to stimulate the economy during difficult periods, as lower interest rates can motivate purchasing and borrowing behavior, helping general a positive financial cycle. And when the economy is thriving, the Fed can choose to raise the rates, restricting access to loans and other forms of liquidity to help moderate growth.
What Low Interest Rates Typically Mean for Savers
Any change in the rate can have an unpredictable impact on the stock market. For those who invest in the market — including many traditional 401(k) plans or money market accounts — the results can be equally unpredictable.
While markets fluctuate in the short term, there isn’t necessarily any cause for concern. Retirement accounts are often structured to weather these changes, with targeted long-term goals still achievable. At the end of the day, retirement accounts and individual savings plan remain some of the best tools for your personal financial planning success.
What Should I Do When the Rates are Low?
If you’re thinking about refinancing a loan, doing so while the rates are low can be beneficial. If you’re hoping to earn more with your savings, comparing national and local rates on different products can help you find the best rate. You could find a higher-yield CD or Money Market account with more competitive rates could help you save more, faster.
Different financial institutions will have different rates as well. Community Banks, like Dime Community Bank, often offer better rates than larger banks as we’re able to move more quickly when interest rates change. That’s why we’re able to offer a competitive 1.35% APY on our Money Market accounts.
Tips for Savings More
When the Fed raises interest rates, there’s no guarantee that banks will operate in kind, so it’s a good idea to compare rates from a variety of institutions before deciding where to save. “Good” rates vary with the federal funds rate, as well as with individual banks and accounts. Here are a few things to keep in mind as you start your search:
- Make sure you understand the terms and conditions of each bank’s rates. Banks regularly run promotional rates for certain accounts that may expire or decrease after a set period. It may still make sense for you to consider saving this way, just be prepared to adjust your plan when things change.
- It’s a good idea to keep your savings as liquid as possible to position yourself to take advantages of any changes that come in an ever-changing financial environment. CDs with very long deposit terms might not be the best choice when there’s an interest rate change on the horizon, as your funds will be locked in for that predetermined amount of time, and you’ll be penalized for withdrawing them early.
- Make sure you pay close attention to account rules — some banks require a minimum of funds in the account each month. Learn all the finer points before making the decision about where to save your money.
Selecting the right savings product is even more important as the interest rates continue to change. At Dime, we’re here to help answer your questions about interest rates, money management tips, and how to best position your savings for success. Speak with a representative today at 1-800-321-DIME (3463) or stop by your local branch.