What Does The Fed Rate Cut Mean For Savings?
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Uh, it means lower APY of course! Today, the U.S. Federal Reserve slashed 50 basis points to a rate of 1.50%.
The stream of bank failures
This rate cut in a state of increasing financial turmoil may be a life preserver for the economy but the effects it has on savings accounts and their user may be negative.
Fears and worries
Here and there, everyone keeps expressing their concerns over the stability of banks. They do not care if their money is FDIC insured. They just don’t want to deal with the changing of names and accounts when a bank disappears. These fears and worries prevent the people from putting their money into the bank. Financial institutions have been known to provide a great level of trust and security among its account members. But, the economy has substantial changed the views of the people.
Lower rates means lower earnings from interest
All the high-yield savings accounts are susceptible to the impending reduced interest rates from their respective banks. Last year, we saw rates up to 6% and even more on CDs. Now, it seems that 3% may become the maximum.
But… DON’T FRET! KEEP SAVING!
While the reasons to refrain from putting money in banks are understandable, step outside the box and take a look. The economy is taking a slide and your money in savings contribute to the solution for these failing times. No financial institution is safe. So stop asking, “where should I put my money?” Put it somewhere with minimal risk and volatility. It may be in savings accounts, CDs, or low risk funds. Anything is better than nothing.
Don’t hide your money, let it grow.
Photo credit: TruShu
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