Rising Interest Rates?

Last week, I was listening to news radio on the way to work (side note – when did I become the person who listens to the news rather than a fun morning show?).  They were discussing interest rates and a recent comment from Federal Reserve Chair Janet Yellen that interest rates could start to rise in the US in 2015.

It’s a good sign – it means that the Fed seems to think our economy is improving.

If the Fed raises rates, that will make all other rates start to rise.  As a saver, it’s exciting to think that the interest rates on my accounts might start to rise.  I miss the days of the high yield savings accounts and high interest rates on CDs.  I used to regularly keep my savings in a CD ladder, but haven’t bought a CD in years because the rates were terrible.  Significantly worse than my savings accounts.

For example, right now, my Capital One 360 Savings Accounts have an APY of 0.75%.  A 12 month CD from Capital One is at 0.4%.  Of course, my savings account APY could drop at any time to below 0.4%, but the yield is so low that I am not worried about the risk.

Of course, I took advantage of these low rates.  I bought a house and then refinanced it when rates dropped even further.  My 30-year fixed mortgage is locked in at 3.875%.  When I was looking at refinancing, I was cheering the drop in interest rates.

While it feels a little selfish to be hoping for a rise in interest rates now that higher rates benefit me again, that’s the way the market works.  I would love to be able to start my CD ladder going again.  It was fun to see how much I was earning by saving.  And the added rewards made saving even more appealing.  I used to make it a point to transfer as much money as possible into the high yield savings accounts.  Now that that yield is so low, I’ve started keeping more cash at my brick and mortar bank just because it’s easier.  The work isn’t worth the rewards.

For now though, it’s just wait and see and hope that the economy continues on an upward trend.  Because it’s not just about my personal wealth.  I want to live in a country with a strong national economy as well.

(Though a growing savings account would be a sweet bonus.)

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.