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High interest rates present opportunities for savers

Financial Markets 2019 Outlook
Posted

Now that the federal reserve has hiked interest rates another quarter of a percent, you may wonder what this means for your money.

When interest rates go up, things like mortgages, credit cards and student loans become more expensive.

However, for savers, higher interest rates could be a financial opportunity. The interest earned on savings accounts, money markets and certificates of deposit have all gone up significantly.

"A year and a half ago, we told clients cash was trash, so to speak; in other words, it didn't do you any good just having money sitting in a savings account, because you weren't keeping up with inflation, weren't earning anything,” said financial adviser David Brooks.

But things have changed. He says today, savings rates on money markets and CDs have jumped to more than 4 percent, so you can actually get a return on your investment.

For comparison, earlier in the pandemic, rates for some accounts were often less than one percent.

“Now, unfortunately, inflation is still north of 6.5% as of today, so we're still not really keeping up with inflation, but it is a way to at least earn a return on your safe money, if you will, that before you couldn't get,” Brooks said.

Another option to consider, he says, is T-Bills. These are short-term treasury notes from the federal government. Their current rate is more than 4 percent as well.