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Do not be discouraged, the important thing is to start saving
As part of the measures to face the presence of the coronavirus and its economic impact, the United States Federal Reserve reduced its interest rates to 0.25%. This means that large companies that request a loan from the government practically pay very little interest on the amount and if they offer financial services and products it is reflected in their own interest rates. But speaking of a savings account, doesn’t a low interest rate affect its performance?
When a person opens a high-yield savings account, it is with the intention of making their money grow, but despite the fact that federal rates have practically reduced to nothing, we are going to explain to you why it is still a good idea to put your money in these accounts.
1. You still make money
This is an extraordinary moment and what the country’s economy requires is that it move in the most normal way possible. If you leave your money in a traditional or checking account, you simply don’t have an annual percentage yield (APY) to grow your money. That and not saving is practically the same thing.
The important thing about a high-yield savings account is the fact that it will give you interest in your favor. Although rates have dropped and financial institutions cannot offer you great growth, they still do. So getting an account that offers you more than 1% APY, has no minimum balance requirements, or charges you monthly maintenance fees in circumstances like these, is even more profitable for the value of reactivating the economy of the people.
2. Keep your goals current
Yes, the economy not only of the US, but of the world, is going through a difficult time. But the ways to reactivate production is by lowering the rate ranges. And this will continue for a long time, perhaps until there is a vaccine against COVID-19.
Maybe you can’t take that long-awaited trip or put down a house payment right now, but putting your savings in a high-yield account is still the best option to reach your goals. If you are lucky, it is possible that you will achieve your goal even earlier than expected because this offer of low rates will be present for a long period of time, making other financial products, such as mortgage loans, more affordable.
3. When rates go up, better for you
As Business Insider suggests, interest rates aren’t going to stay low forever. If you save now, your balance will likely be higher when interest rates rise, and you’ll see a higher return on your money than if you wait until this happens and start from scratch.
4. You encourage the habit of saving
If you do not have the habit of saving, it is never an ideal time to do it and at the same time it always is. The important thing in this sense is not the interest rates, but that you start saving. And even on the contrary, in apparently adverse circumstances like the current ones, in the midst of a recession, if there is one thing to learn, it is that saving will always be a great idea, in similar situations it can get you out of trouble.
In addition, any extras you buy for the APY of your high yield savings account, in scenarios where the economy seems to be sinking, are like lifelines for your finances. Better that than nothing. Start saving now.