Are Rising Rates Good?

Sep 20, 2017 by

percent signSpecial treat today: a Guest Post from Patty Moore of Working Mother Life. Enjoy, and please let her know what you think in the comments!

How Rising Interest Rates Could Actually Help You Out Financially

Sure, everyone talks about high interest rates being a bad thing across the board, but did you know that it can actually be pretty helpful if you are in the right situation?

It may seem counterproductive, but it can actually really help the economy in several ways.

With the future of our interest rates pretty unsteady, it may be time for you to consider how to take advantage of rates if they start to rise. The good news is that they rise incrementally, but over time there could be a significant increase.

Better Return on High Interest Bank Accounts, CDs, and Other Long Term Investments

Saving money is probably one of the most important things that you can do for your future. More and more people are not saving for their future as they should, with a little more than half of all Americans having less than $1000 in their savings account. This is based on a recent survey conducted by GOBankingRates.com.

Interest plays an important role in savings, as it is more or less a bribe or reward for waiting to spend money, rather than letting it burn a hole in your pocket.

If you are one of the financially savvy Americans that have a solid plan for your future when it comes to savings, then you can really benefit from rising interest rates. It gives more of an incentive to put your money into a high interest bank account. Based on Lendedu.com’s analysis, interest rates on high-interest bank accounts typically range from 0.3 to 1.4 percent.

The more you can save, the more you can gain in interest. Much like high interest bank accounts, certificates of deposits and money market accounts can also gain a higher return when the interest rates go up.

A Stronger U.S. Dollar for Those Traveling Abroad

The foreign exchange rate between countries has a whole lot to do with the value of the U.S. dollar. When the U.S. dollar has a higher exchange rate, this is great news for travelers. Typically, when interest rates in the United States are on the rise, the value of our dollar tends to go up. This makes it cheaper to travel, and thus gives people more of an opportunity to see the world, expand their businesses, and even import goods from other countries.

Better Prices on Certain Commodities

Another good benefit of rising interest rates is the effect that it has on certain commodity prices. When producers of commodities like coal or steel see a higher interest rate, they will typically produce more because it is an incentive for them to have a larger return on their investments. The more that they produce, the lower the prices will fall on these commodities. This is just general supply and demand knowledge.

A More Stable Retirement Fund

Many jobs these days offer fixed benefit retirement plans as a part of their compensation package. Typically, these plans are funded by investments. When the return on investment is higher, retirees can see that directly when it comes to their retirement plan and how much money they see from it. With lower rates, retirement plans may be shaky, at best.

Certain Stocks May Flourish

If you dabble in the stock market, then you may be happy to see an increase of interest rates. This is not always the case, as some stocks can take a huge hit from interest rates going up, but there are some stocks that will flourish.

Stocks in the banking, investing, and insurance industries are likely to see a hike, while others may see a steep fall. If rates are on the rise, choose your investments wisely in the stock market to ensure a better return on your investment (or perhaps more importantly, to reduce your risk of losing a big chunk of change).

More Jobs Available in a Thriving Economy

Even if you don’t have any money in savings, a rise in interest rates can still offer some benefits. When interest rates are on the rise, there is more money flowing through the economy. This can lead to more job opportunities. If you are on the hunt for a job, then take these rising rates with a grain of salt because it may be your ticket to finding employment.

While rising interest rates can still have a negative impact on borrowers, especially those with credit cards that already have a higher interest rate, it is important to understand that it does not mean the worst for everyone. When rates are on the rise, it may be a good time to get serious about saving for your future. After all, the savers are likely to see the biggest positive impact or gain from the federal reserve rates going up.

Patty runs Working Mother Life – a blog about balancing motherhood and work. You can follow her on Twitter to stay updated with her latest posts, tips, and tricks.

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