Savers continue to struggle

Yesterday, there was an article in the Washington Post containing information that will come as no surprise to many of you.  The current efforts to keep interest rates low in order to try and prop up the economy is hurting savers.  While lower rates are great when you’re buying a house, they’re not so great while you’re saving to buy a house.

When I opened my ING Direct Savings Account in the summer of 2007, the interest rate was (I believe) 4.5%.  It started dropping in September, and just kept going.  Now it’s at 1.3%.  That’s a significant difference.  Of course, it’s still better than the rates at my local brick and mortar banks, so I’m not complaining too much.  (And yes, I know that other online banks may have marginally better rates, but I really like ING Direct so I’ve decided to not rate chase for savings.  CD’s yes, savings accounts no.)

Not long ago, we were seeing year long CD rates over 5%.  Now we’re lucky to find 2.5%.

It’s tough for savers.  But complaining’s not going to do anything, so we just have to sit back, continue to save, remember that even if we aren’t earning any interest at all, we’re still saving.  That’s what matters.

The article I linked is a bit angry, in a way, blaming Wall Street greed for the plight of the saver.  I have mixed feelings on the issue.  While I know that cutting rates benefits a lot of people, not just the stereotypical Wall Street fat cats, it does grate a bit to know that there are people making insane bonuses after making bad decisions while others who did nothing wrong are struggling to make ends meet.  But there are many sides to every story, so I have just decided to worry about myself and continue to save (and, of course, donate to charities that help those less fortunate than me).  And hope that things improve soon.  I’ve noticed an increase in CD rates over the past few months, so hopefully that’s a good sign.

Megan Smith

Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance.  It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information.  It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck.  While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan.  I needed to budget.  I needed to know what I was spending my money on.  I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way.  I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.