If you have been reading or listening to any sort of financial news in the past year or so, you know that inflation had hit a pretty high point. So high in fact, it’s incredibly hard to leave the store, any store, without spending $100 or more. It’s impacting the wallet, the bank accounts, and the overall mood of buyers everywhere.
The Fed has made it a goal to reach our normal inflation rate of 2%, and so far the increase in interest rates have helped bring down inflation. Whether there will be more rate hikes in the next few weeks, I’m not too sure, but I know they’ve stated that the fight is not over, and that could mean another hike or two can be expected.
These interest rate hikes are hurting the businesses, as it’s more expensive now to borrow money. This means a slowdown, which may sound bad, but it helps in the fight against inflation. It’s strange to think that the economy slowing down is a good thing. Or people losing jobs might also help bring inflation down. With businesses slowing down, producing less, investing less into the future until interest rates come back down, it means less jobs available within that business.
I think I am spiraling at this point, but the main take away would be that with inflation and rising interest rates decimating stocks and real estate, where do you put your money to grow? A few big bank interest rates are an absolute joke, while some banks like SoFi will give a higher APY, to park your money with them. But the problem is, with those interest rates, they are still under what inflation is currently at. So you may be wondering, how do I protect and still grow my money.
Parking your money in those accounts with higher APY is still better than doing nothing with it. Keeping in a regular savings account gets you nowhere, money market funds aren’t much better, and keeping your money under the proverbial mattress, is even worse. Your money can’t work for you if you don’t put it to work somewhere. A CD wouldn’t be a terrible option. Obviously your money is parked for a few years, depending on the CD length of time, but at least it’s earning money.
Another option, I am sure you’ve heard of, is Bonds. US Treasury Bonds. One of the most secure, safest, ways of parking your money with some really low risk. There may be some better options for you at the US Treasury, as they are trying to keep up with inflation. There are bonds called TIPS, Treasury Inflation Protected Security. These bonds help protect you against higher inflation, while trying to give you a decent interest rate. It may not grow your money, but it may be able to help keep your buying power.
Bonds are a great option, and I know they typically say that when Interest Rates are growing, bonds are typically not the best financial vehicle, but when you think about inflation heading lower, eventually those interest rates will have to also head lower. When that happens, you may see better rates of return happening with your interest rates. Locking higher interest rates on your bonds may also be a great way of growing your money while we are in limbo of interest rates and inflation.
I am currently reading Bond Investing for Dummies and trying to learn the ins and outs, but it’s a lot of information. I never knew there were so many types of bonds, Government, municipal, corporate, emerging markets, and the list goes on and on.
One thing I am trying currently is a bond ladder with 4 week T Bills. With that, and the reinvestment, my money is growing. Not excessively, but it helps lower the burden of inflation.
I would strongly suggest looking into the Bond Market, and particularly with the US Treasury. https://www.treasurydirect.gov/ – They have many different Bond Types, dealing with interest rates and how long you would like to park your money with the US Government. There are penalties to pulling money out before the bond matures, like removing half of all interest that was gained during the life of the bond. So you really want to look into how long you are willing to sock that money away, and what interest rates would allow you to grow your money, after inflation has taken a hit and interest rates start coming down.
I know I have thrown a lot around, it’s generalized information because I am still looking into this information as well. I am no expert, but I am hoping I can point you in the right direction. Make an account on TreasuryDirect.gov and put your bank information in. Start buying bonds as soon as possible, especially look at TIPS and long term rates.
My hope is to push you towards a different option if Stocks and Real Estate just aren’t working out right now. The market will come around, it always does, but you still want to protect yourself during the down trends. Buying stocks during the down trend is a great time to get a deal, but it won’t help you grow that money until the market turns around. Be aware of all financial products and vehicles to get you to your investment goals!
Thrifty Investing 