For those of you who have been following the markets and the current state of the economy, you know that the Federal Reserve has been hiking interest rates for months now to combat high levels of inflation. Living in this higher interest rate environment, many individuals have been seeking strategies to maximize their cash, including taking advantage of these high rates in vehicles such as high yield savings accounts, CDs, Treasury Bills, and I-bonds. As inflation is finally beginning to ease, let’s talk about how these vehicles will also change in response and what to look out for.
Next week on June 13, the U.S. Bureau of Labor Statistics will report the Consumer Price Index data for May, which will indicate what the Federal Reserve will do at their next meeting to interest rates. The Federal Reserve has hiked interest rates 10 times over the last year, and efforts to combat inflation has showed progress as inflation has definitely decelerated sharply since last summer, but core inflation remains in a close range.
As we have talked about a great deal over the last few months, high yield savings account rates have reached a 15-year high, with “top-yielding online savings account rates now just north of 5%, the highest since 2008, and much higher than last year’s 0.8%”, according to Bankrate.com. So, if you have yet to capture this higher yield and your money is still in a large money-center bank earning close to 0%, consider switching to maximize your savings. Given the uncertainty we have seen in the banking system, you also want to keep in mind the importance of FDIC-insured limits while still shopping around for the best interest rates.
Next, for those savers who have wanted to earn additional interest on their cash, they have been parking their money in I-bonds, Treasury Bills, and CDs, that have been earning over the 5% mark. However, in more recent weeks, with inflation easing, Series I bonds and Treasury bills are beginning to slip, with CDs still remaining attractive to savers. So, if you have cash sitting you’d like to earn risk-free interest on, lock up those 5%-range CDs before it’s too late. Of course, before locking up your cash into a CD, you need to make sure you address your time horizon and need for those dollars.
We know that current economic environment is ever-changing and the future of the banking system and economy is uncertain, but want you to maximize your savings and take advantage of all attractive financial opportunities available. As mentioned above, before jumping into anything or locking up your money in an investment vehicle with time restrictions, make sure you think about your goals, priorities, responsibilities, and needs. Now is a great time to think about working with a financial professional to spring clean your finances and plan for the rest of the year. If you have any questions about interest rate policy of your specific financial situation, email us at info@shermanwealth.com or schedule a complimentary intro call here.
