To spend or to save ….

Now that we understand the basics of what’s going on in the economy, it’s more important to know how it’s going to affect us. In one of the latest developments in the financial crisis, the Fed cut short-term interest rates, which is basically an effort to get American’s to spend more money because when interest rates are low there’s no incentive to save …. unless you’re me, and I’m sure some of you.

According to SmartMoney.com, now’s the time to get your money into a CD or a money market - especially if you come across a deal. The current rate for a six-month and one-year CD is 2.1 percent and 2.47 percent, respectively. If you’re not familiar with CD rates, that’s really low!

BUT don’t get wrinkles worrying over that just yet, according to Bankrate.com, some of the top one-year CDs are still offering rates up near 4 percent (GMAC, Capital One and ING Direct) and I’m looking into a 4 percent six-month CD at HSBC.

But the smart people at SmartMoney say to act fast:

Since April, when the last Fed cut occurred, banks have offered relatively high interest rates on certificate of deposits (CDs) and money-market accounts as a way to bring in additional funds, says [Greg McBride, senior financial analyst at Bankrate.com]. That will start to change quickly.

“Over the next couple of weeks you’ll see CD yields unwinding,” he says.

Blogger’s note: Yes, this post links to one of my own articles. Shameless plug.

Posted October 10, 2008 at 11:12 pm by Erin | Share on Facebook
Categories: Economy, Saving, Student Finance

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