This Week In Your Wallet: Interest Rates Are Heading Up
Last Wednesday, for the first time in nearly a decade, the Federal Reserve raised short-term interest rates. As expected, the hike was a small one.
The Fed moved the target for short-term rates from a range of 0% to 0.25% to a range of 0.25% to 0.5%. What does this mean for you and your wallet? It depends on your situation. Here are a few to keep in mind:
Investors: Anticipate volatility and lower returns in the market. Why? Research by Robert Johnson, co-author of “Invest With The Fed,” shows (historically) when rates were trending down, the S&P 500 returned an average of more than 15% annually. Trending up, the average return was 5.9%. Younger investors can ride it out, but if you’re nearing retirement (or are already in it), focus your attention on stocks that pay dividends and make sure you don’t have so little in cash that you have to sell at a low point.
Savers: Rates on your savings will get better, albeit sloooowly. Search for the best rates (on a site like Bankrate.com) that offer a substantial premium over the average ones. And if you’re buying certificates of deposit (CDs), go for short time periods so you can roll into higher interest rate CDs as rates rise down the road.
Students: Your rates on pre-existing federal loans (issued since 2010) won’t change. They’re set for life. (Unless you refinance them, of course.) This year’s rates (4.29% for undergraduate direct loans) are set until July 1, 2016. Then, they’ll be reset based on the May auction of 10-year Treasury notes. Officials add 2.05% to that number to determine the new rate for undergraduate direct loans, 3.6% for graduate direct loans and 4.6% for PLUS Loans.
Homeowners (buyers and sellers), car buyers, entrepreneurs and more, continue reading here.
ICYMI On The Advent Calendar Of Holiday Savings
For your gifts that missed the mark, ConsumerWorld.org’s annual return policy survey found a couple of industry trends in your favor. For example, almost half (49%) of all e-commerce retailers surveyed will now pay for your returns. (Zappos led the way, and now Macy’s, Target, Saks, Gap, Old Navy, and so on, have followed suit.) Target also added a one-year exchange/refund window for its store-brand products.
But despite these wallet-friendly trends, the survey (still) finds many of these stores’ return policies to be convoluted. In fact, the return policies for the “big dozen” surveyed total to 68 pages and over 26,000 words. See the biggest offenders here, as well as a list of the most forgiving stores this holiday season.
If you’re on the fence about a gift you purchased for someone – or still can’t figure out what to gift – then consider this piece of research from Stanford University: It turns out there’s no correlation between the amount of money spent on a gift and the appreciation the recipient feels. That means appreciation doesn’t have a price tag. With this in mind, I offer up some last-minute savings tips for shoppers on the calendar I put together for Today.com. For instance – if you need to get a gift this week – it’s time to brave the stores. With Christmas less than two days away, you’re going to pay the premium for shipping – and risk the gift not making it under the tree in time.
We’ll continue to unlock savings tips until Sunday!
Last-Minute Gift Ideas
If you’re pressed for time – and stumped on what to get someone – then take a look at these 16 gift ideas from Kiplinger. Even better, they’re gifts that keep on giving, like stocks. We’ve talked about gifting stocks before, which you can do both online and off. (Stockpile, for example, sells gift cards of stock at participating retailers, like Kmart, Lowe’s, Office Depot and Safeway.) Another idea: If you have a cable-dependent family member or friend, then how about gifting them a streaming service subscription (e.g. Netflix, Hulu or Amazon Prime). And for stocking-stuffers, you could get flash drives. Who doesn’t need more GBs these days? Continue brainstorming here.
The Hottest New Benefit
In an effort to retain and attract young, top talent, companies including PwC and Natixis Global Asset Management will offer student loan repayment programs to its employees come January. USA TODAY reports only 3% of U.S. employers currently offer these programs, but we can expect to see more companies adopting them this year and next. This benefit is a gift in and of itself, considering this year’s graduates, on average, are coming into the workforce with more than $35,000 worth of debt.
Have a great week,
Jean
