Jakarta –
Investors have many options for short-term savings. However, this choice becomes more complicated amid high inflationary pressures and rising interest rates.
Indeed, there are signs of a slowdown in inflation. While the Federal Reserve or the Fed expects high interest rates to continue.
“It looks like this year is going to be a little tricky,” said Ken Tumin, founder and publisher of DepositAccounts.com on Thursday (5/1/2023), as quoted by CNBC.
Although the Fed’s federal funds rate hit a 15-year high, savings account rates have yet to match these increases.
According to Tumin, if you’re saving money in a savings account, it’s wise to choose an established bank. It does not recommend saving at technology companies that provide financial services.
“You have to go directly to an FDIC-insured (Deposit Guarantee Agency) bank, not through fintech,” Tumin said.
Another option for short-term savings is a certificate of deposit or CD.
“It’s a strange environment where we can actually get higher rates for short-term CDs than long-term CDs,” he said.
While Tumin expects savings account rates to rise, these rates may not match the one-year CD that follows the Fed most closely and was offering an average of 4.81% on Jan. 4.
As inflation has risen, Series I bonds, inflation-protected and virtually risk-free assets, have also become a popular choice for short-term savings.
Bond I currently pays 6.89% annual interest on new purchases through April, down from the 9.62% annual rate offered from May through October 2022.
“It’s become very popular with our clients because the rates have skyrocketed,” says certified financial planner Eric Roberge, founder of Beyond Your Hammock in Boston.
(La la)
