Are you feeling the pinch of inflation?
I know I am.
Everything I buy seems to cost more than it used to, from food to gas to even Netflix!
And it doesn’t look like things are going to get easier anytime soon, according to the Federal Reserve.
The Fed’s boss, Jerome Powell, said on Tuesday that they will have to hike up interest rates faster than they planned to fight inflation.
This means that it will be more costly for Americans to borrow and spend money.
But experts say there is a silver lining: saving money will become more rewarding.
“Savers will likely enjoy higher returns on their money until inflation is under control,” says Mark Hamrick, senior economic analyst, and Washington bureau chief for Bankrate.com.
And we can already see some evidence of that, with some savings accounts and certificates of deposits, or CDs offering rates as high as 4.3%-4.5%.
Savings rates keep climbing As the Fed funds rate goes up, so does the average annual percentage yield, or APY, on high-yield savings accounts and CDs.
The average interest rate on savings accounts is still low, but some high-yield savings accounts now offer rates that haven’t been seen in a long time.
Take advantage of this!
Even though the typical rate for a 12-month CD is only 1.36%, some banks and credit unions offer better rates because of the competition.
You might think that higher interest rates are bad news for your investments in stocks and bonds.
But Nicholas Bunio, a certified financial planner with Retirement Wealth Advisors, says you shouldn’t panic. He says higher rates could actually create more opportunities for long-term investors.
“When rates go up and push stocks and bonds down, that could be a chance to buy more at lower prices,” Bunio says. He also says he expects “rates on CDs and savings accounts to keep going up and make them a good option for extra cash.”
Saving money in times of high inflation
You’ve probably noticed also that everything seems to cost more these days. (Unless you belong to the top 1%!)
From groceries to gas to cars to rent, prices have gone up by 6.4% in the last year, according to the government. “Inflation has hit almost every part of the consumer market,” says Julie Ramhold, consumer analyst with DealNews.com.
It’s no wonder that saving money has become harder for many people. As many as 35% of U.S. adults have credit card debt that they carry over every month, a recent Bankrate survey found.
And 68% of people who took another Bankrate survey said they wouldn’t be able to pay their bills for a month if they lost their job today.
That’s why experts say it’s more important than ever to look for the best rates for your savings account or CD investment. “Don’t settle for the first offer or option you see,” Hamrick says. “Shop around for the best rates and compare different savings products.”
Bunio also says it’s crucial to make sure your money is safe and protected in any bank or credit union you use. “Check if they have FDIC insurance,” Bunio says. “That means if the bank goes bankrupt, the federal government will cover your money up to $250,000 per bank.”
So if you think your stocks are getting hammered, think outside the box!
Remember, just keep your head down and don’t panic. As they say: When life gives you lemons, make lemonade!
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