Low Returns: Why You Should Save

With interest rates at an all-time low, meaning that borrowing money is cheaper than ever, it’s hard to see the benefit of saving. In fitness when you exercise you don’t expect to see the benefits immediately; financial fitness is the same way. It’s all about average returns over a period of time.

How Interest Rates Work

Right now, finding a savings account that yields more than a 1% return is tough. However, finding an auto loan below 2% is fairly easy. When it’s cheap to lend out money, it doesn’t pay much to keep it. People forget that the rule is also reversed because when savings accounts yield 8%, loans have much higher interest. Your best bet is to save all you can now by taking advantage of the low cost of lending so that when the rates rise, you are ahead of the game.

Saving Versus Investing

If you’re looking to maximize returns, a savings account isn’t the best place to park any funds you don’t need to withdraw in the near future. If you’re looking to earn more on your money, consider an index fund, mutual fund, or even a well-tended stock portfolio. Remember that placing your money in the market is a give and take. You could earn higher dividends even in the current market, but you could also lose it if the market takes a dive.

The Key to Better Returns

The key for investors and savers is not to worry so much about what the rate is right now, but to set up a habit of saving consistently and keeping that money invested.

Consistency forms habit and habit forms tradition. Share your tips on the forum about the steps you take to ensure a financially fit family!