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This Week in Your Wallet: What Rising Rates Mean For Your Savings

Welcome back! I hope everyone had a fantastic holiday weekend. We spent the time on Long Beach Island with family and old friends and truly decompressed. (I’m 33% into the new Dan Brown novel, Inferno, which I’m enjoying — and can’t say enough good things about Meg Wolitzer’s The Interestings, which I finished. Best book I’ve read in a long time!)

Now that we’re (hopefully) feeling a bit more refreshed, it’s not only time to get back to work, but down to business. And this week, that business means talking about interest rates. If you’re in the market for a new house or car, you’ve likely been following the rising rates with a close eye. As I recently told CNBC’s Maria Bartriomo, we’ve seen mortgage rates pop since May, and as of this writing, they were hovering around 4.6% on a 30-year fixed mortgage. Not quite the low-threes we were seeing a few months ago, but hardly anything to despair over by historical standards. That said, if you’re in the market for a home and you find a loan that works for you, I’d lock it in.  I’d also look into a “float-down” option in case rates fluctuate a bit to the downside before you close; that way you won’t miss out.

Savers, on the other hand, might be wondering if it’s finally time to rejoice. As USA Today recently asked: “Shouldn’t CD rates be ready to rocket?” The answer: yes and no. Interest rates are headed up, but it will be a slow climb — not a rocket. Mark Zandi, chief economist for Moody’s Analytics, told USA Today that “it won’t be a straight line up for interest rates, but they will be higher.”

So what does that mean for your savings in the short term? First and foremost: don’t lock awayyour money in a five-year CD. If you tie up your money now, you could miss out on much better rates in a year or two. However, if you’re insistent on capturing the highest possible interest rate right now, shop around for CDs with shorter terms. The USA Today article notes that Ally Bank has an 11-month CD with an 0.85% yield, and a one-year CD with a 0.94% yield. Just be sure to read the fine print — many of these accounts come with penalties for early withdrawals.

Finally, it’s important to be cautious and do your research. Just because you hear that interest rates are rising doesn’t mean that a broker offering a CD or savings account with a 5% return is telling the full truth, or offering a safe product. The Federal Deposit Insurance Corporation (FDIC, the entity that insures the money you put in the bank) told USA Today that a foreign bank offered a high-rate CD, but it was not protected by FDIC insurance. (As I like to say: if it sounds too good to be true, it probably is.)

Before we get to the headlines of the week, a quick announcement: Money School is coming back, and will be better than ever! We’re offering six classes in the fall semester, and registration is now open — to sign up, just click through this link here. And since many of you asked, I’m pleased to report that this semester we will offer recorded versions of the classes. If you can’t make a class, the recordings will be available for viewing at a later date — and you’ll still be able to access Office Hours!

And now, here are the other headlines for the week:


Work-Life Balance, Realistically

Sheryl Sandberg’s Lean In made a splash when it was released in March, in part for its message (women, don’t leave the workplace before you actually leave), and in part for its messenger (the Facebook COO who can very much afford to not leave the workplace). It’s a fascinating book, though as many women have pointed out, not entirely realistic. After all, not every parent wants to work more; what they want is to not miss school plays, and to be around to help with homework. To that end, the New York Times recently profiled one woman’s quest for a flexible career, and I thought it was an interesting and realistic read. The profilee insists she doesn’t have it all figured out, but she does advocate one particular career move that has helped her balance family and work: asking to work from home one day a week. In her case, Fridays, which she tested in the summer when the office was on shorter hours anyway.

I’m curious: what have you done to help make your career fit your family life? What one or two things would make this juggle a bit easier?


Don’t Get Taken For A Ride

The takeaway to most shopping advice often boils down to one word: research. It’s what you should do when buying a house, a car, a credit card, a mutual fund — really, just about anything. And, according to a new study out of Northwestern University, it’s especially important for women who are shopping for an auto repair. According to the study, women who revealed they didn’t know what a repair should cost were charged more than men who admitted they didn’t know what a repair should cost — and the overcharge averaged about $23. Yikes! However, this study wasn’t all bad news: the researchers also found that women were more successful than men with haggling over the repair costs. Just imagine how much money they could have saved if they had started with a cheaper baseline…

Have a great week!


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