When we save money by depositing it in a bank or financial institution, the amount of interest we get is determined by the interest rate offered. If the interest rate is high, people are more likely to save. However, a decrease in the interest rate means that there are fewer rewards when we save making it less attractive for us to save money.
When it comes to saving, there are several factors that affect saving:
Economic confidence drives us to assess the market, and if the economic outlook is pessimistic people will save and pay off their debt.
• Financial Conditions
When credit becomes hard to get, it prompts people to concentrate more on saving.
People’s savings are often tied up in assets, when the market price for those assets rises, it increases equity withdrawal but falling prices have an opposite effect.
To simply understand how the concept of interest rates work; whether the interest rate is low or high, it all depends on the Federal Reserve. When the economy needs to improve, the Federal Reserve lowers the rates. By lowering the rates, people and businesses are encouraged to take out loans, increase their expenditure stimulating the market. Regardless of the rates, it is always good to save money to increase your cash cushion.
When you start saving, there are several ways to make the most of what you have.
• Comparing saving rates from various banks
If your savings account brings you more money, that is considered to be above average but if it earns you less, it is better to look for alternative options.
• Eliminating existing bank fees
It is almost impossible to make your bank pay more but you can control how much it charges you. Always identify ways of getting your fees waived.
• Consider account sign-up bonuses
Some banks offer promotions to new clients who meet their specifications. This can be via signing up for a direct deposit, making several debit card purchases, or ensuring you maintain a minimum balance for several consecutive weeks.
Low saving interest rates can be demotivating when it comes to saving. It is therefore important to find out ways of improving the issue. This can be accomplished by:
1. Checking High-yield Accounts
These are accounts that include the benefits of standard checking and FDIC insurance with the bonus of higher interest rates.
2. Money Market Account
High yield money market account includes balance minimums with additional requirements to receive higher interest rates.
3. Certificate of Deposit
Acquiring a certificate of deposit offers you a fixed return when you lock up your money up for a specific period. This guarantees you a specific return rate that is slightly higher.
4. Money Market Mutual Fund
They are uninsured, short-term investments in relatively low-risk securities which are offered by brokerage firms and banks.
5. Real Estate Investment Trust
The real estate investment fund are companies that own and manage real estate and are well known for paying out substantial dividends.
Do not let low saving rates hinder you from getting what you deserve.