- Pop Quiz: Does an Airline Have to Put You Up in a Hotel When Your Flight is Canceled?
- The Restless Project: $60K Income Doesn’t Cut It for My Family
- MasterCard Introducing Fingerprint-Scanning Credit Card
- Dentists’ Tricks of the Trade: Don’t Get Drilled by Dental Bills
- 7 Tidbits of Financial Advice You Should Ignore
- 5 Lies Retailers Tell (And How to Avoid Falling for Them)
- How to Lose the Most Money Possible When You Buy a Car
- Ask Stacy: Should I Borrow From My Retirement Account to Pay Debts?
If you’re keeping money in the bank, you know how low rates are. And if you’ve done any food shopping lately, you know how high prices are. But what you may not have considered is what low savings rates and high inflation can do to your savings.
Think about this: the inflation rate this year is hovering around 4%, while the average bank money market account is paying less than 2. In other words: your money is loosing value faster than your interest rate can compensate: you’re going backwards.
What should you do? Well, you could consider stocks. Over time, they beat the rate of inflation, but this year the stock market is loosing money.
In the past, you could’ve just bought government I-Bonds. They pay a fixed interest rate, plus an inflation kicker… so you were guaranteed to beat inflation. But, not any more.
10 years ago, when I-Bonds first came out, the fixed rate was around 3%. So, you would earn 3% on top of the rate of inflation. Now, I-Bonds carry a fixed rate of 0%. So, instead of a return guaranteed to beat inflation, now you’re guaranteed not to. Looking for an alternative? Many professionals recommend CD’s.
So, the conservative investor has to think savvy. Go bank to your bank and, if you’re not happy with your interest rate, shop it around. Odds are that, with a good online resource, you’ll be able to find a bank paying 40-50% more.