Take Advantage of Higher Interest Rates

By Debbie Wilson
LoanPage.com Columnist

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Many Americans cringe when they think of the 17 straight interest rate hikes from the Federal Reserve over the past two years. But believe it or not, higher interest rates can be a good thing, especially if your mortgage rate is fixed for awhile.

Why? Well, the current interest rate on savings accounts, money market accounts, and certificates of deposit are the highest they've been in years. That means your money can earn a lot more today if you put it to work for you.

Savings Accounts

Having money in an easily accessible savings account can help you build financial stability. Your money will be kept safe while earning an attractive interest rate (approximately 5.25%) And you can quickly access your money for mortgage payments, medical bills, or other necessities, making it a convenient place to park savings for debt consolidation goals.

Money Market Accounts

Money Market accounts offer similar liquidity to a savings account, but your balance can earn a higher interest rate when you maintain a minimum deposit amount. These accounts can be a good place for larger amounts that you may need to access quickly for emergency purposes.

Certificates of Deposit

Certificates of Deposit (CDs) are a great way to earn interest over the long term. CDs are enjoying some of the highest interest rate yields in years (5.38%) and may continue to rise. Because there may be a penalty for withdrawing the money from a CD before it matures, these accounts are best used for long-term savings goals. These goals might include a down payment on a mortgage loan or a college tuition fund.

When looking at CDs, be sure to match your CD term to the timeline of your goals. A great strategy for ensuring higher rates and increasing liquidity is to purchase several CDs with different maturities--for example, a one year, a two year, and a three year. This is called "laddering" your CDs and means that every year at least some of your money will be available without incurring a penalty for accessing it.

So go ahead and let your money work for you. With today's higher interest rates, saving can be a little less painful and a little more enjoyable.

About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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