The Fed vs. Your Savings

The Fed vs Your Savings How MUCH HAVE LOW INTEREST RATES COST Us? Since the Great Recession, the Federal Reserve has taken extraordinary measures to keep interest rates low. These policies have likely diminished Americans' purchasing power. Short-term deposit rates have historically kept pace with inflation - until recently Inflation vs Interest Rates 1.5% 0.12% March 2012 to March 2013 March 2012 to March 2013 average money market account yield, according to the FDIC inflation rate, according to the Bureau of Labor Statistics In other words, last year's rate of inflation was more than 12 times the average rate of interest for money market accounts 12x IINFLATION I INTEREST RATES LOST POWER Americans would have a lot more purchasing power today if short-term interest rates had kept pace with inflation over the last 12 months. .those deposits lost roughly As of March 31, 2012, ..at an $8.8 $120 inflation rate of 1.5% TRILLION BILLION was on deposit in in value over American banks ..and an the last year interest rate of 0.12% THE GROWING TALLY OF Loss Estimated loss in purchasing power, in billions $635 2013 $120 4 years combined $205 2012 $170 2011 $140 2010 The Federal Reserve points out that low interest rates also save consumers money by lowering the cost of borrowing money .but the economic impact on savers, particularly retirees and other people who depend on interest income, should not be ignored WHAT CAN $635 BILLION PAY FOR? The combined annual GDP of: = $609.44 BILLION Denmark Luxembourg Ireland $332.68 + $59.48 + $217.28 billion billion billion A year's income for 2.5 11.9 MILLION MILLION median-priced US homes U.S. households (Avg. U.S. home price as of Feb. 2013: $246,800) (Median income, 2007-2011: $52,762) 25.5 1.5 MILLION BILLION flat-screen TVs 2013 Ford F-150 trucks (MSRP: $24,665) (Toshiba 39" flat-screen TV: $399-99) STRATEGIES FOR COPING WITH LOw DEPOSIT RATES While all banks have felt the effects of the Fed's low-interest-rate policies, individual banks vary in their approach to interest rates. Here are five tips for finding a bank that offers a high-yield savings account. Compare banks There is a big difference between the top-paying interest rates and average rates today. Use online resources such as MoneyRates.com to compare multiple banks at once. Due to lower overhead, many online banks offer above- average rates. In the fourth quarter of 2012, average savings account rates at online-only banks were more than five times higher than rates at brick-and-mortar banks. ---------. Look online ------------ Separate your accounts If you don't want to move your checking account, consider taking your savings elsewhere if your current rate is too low. Just make sure it won't lead to increased checking-account fees, which could outweigh a higher interest rate. Locking into a multiyear CD may seem like a bad move in a low-interest-rate environment. But if you find a bank that has a low early withdrawal penalty, you may still come out ahead, regardless of whether you withdraw the money before maturity. 4 Go long if the penalty is low ---------------------------- Remain vigilant Sometimes banks that once paid competitive interest rates drop their rates once they no longer need more deposits. When this happens, consider taking your savings elsewhere. 5 M MoneyRates Make the most of your money Created for MoneyRates.com 8 QuinStreet, Inc., 2013 Sources www.federalreserve gow/newsevents/press/monetary/20081216b. htm www.washingtonpost.com/blogs/wankblog/wp/2012/08/13/ge3-what-is-quantitative-easing-and-will-it-help-the-econamy www.blsgow/news.release/archives/cpi_O1162013.htm www.fdic.gow/regulations/resources/rates/previous html www.fdic.gow/bank/statistical/stots/2012mao/industry.html www.money-rates.com/research-center/cost-of-fed-ra www.tradingeconomics com/country-list/gdp sd-rates-2012 htm www.census.gou/construction/nrs/pdt/newressales par http://quickfacts.census.gov/qtd/states/D0000.html www.kbb.com/tord/150-regular-cab/2015-ford-f50-regular-cab/xl/?vehicleid-381499sintent-buy-newtsurvey www.bestbuy.com/site/Toshiba+-+39%20K2534KS8+Class+-+LED+-+1080p-+6OHZ+-+HDTV/6266485 Did=1218723905648askuld=6266485 www.money-rates.com/research-center/americas-best-rates/2012-Q4.htm