It’s no secret that inflation and rising interest rates have impacted many consumers’ financial security over the past year.
A survey from WSFS Bank found that 34% of respondents in the Philly region weren’t confident they could afford rising costs of living, leading many to change their saving and spending habits.
Nearly two-thirds (61%) said they’re cutting back on non-essential spending, while 42% are delaying a large purchase like a home, car or furniture. About 33% are tapping into their savings to help pay for everyday items.
Changing routines can be challenging, but there are small things you can do to reduce spending. Digital tools like online and mobile banking can make it easy to see what you’re spending, and where to adjust as needed in real time.
Here are tips to help combat the impact of inflation and rising interest rates on your finances.
Saving for a rainy day with fixed returns
Building an emergency fund was a top goal, chosen by 52% of survey respondents in the region.
While rising interest rates have increased borrowing costs, there’s a key tradeoff: the opportunity to earn money on your savings. After years of low interest rates, savings tools like certificates of deposits (CDs) are making a comeback.
CDs can come with terms ranging from a few months to years, and you’ll get a fixed rate of return based on the rate your bank offers and the length of the term.
With a CD, you won’t have access to your funds until the term expires, so it is important to use them in instances where you can leave the money and watch it grow.
Growing your savings with access to your cash
If you’re looking to build your savings but need access to your cash, money markets and high-yield money markets are two options. They offer higher interest rates than traditional savings accounts, while still allowing you to deposit and withdrawal your money.
Pro tip: If you’re saving for a longer-term goal such as a house, consider not linking your savings accounts to your debit card to create a bit of separation from regular purchases.
You’ll find the minimum balance to avoid fees for high-yield money markets is typically higher than with a regular money market. If you’ve built a larger nest egg, the high-yield money market may make more sense for you, but for those with less saved, a standard money market can still provide an opportunity to earn more than a traditional savings account.
Maximizing your coverage
FDIC coverage and limits have been top-of-mind for many people lately, so it’s important to know what’s covered and how to maximize it for your accounts.
Accounts that are FDIC-insured include checking, savings, money markets, certificates of deposit (CDs), and some others.
The FDIC’s Electronic Deposit Insurance Estimator (EDIE) calculator lets you enter your deposit account information at any insured bank and generate a report showing what funds are insured and what funds are uninsured, if any.
Each consumer’s financial situation is unique, so it is important to do your research, and don’t be afraid to seek advice, as your banker’s job is to help you navigate the financial aspects of your life. Speaking with your local banker for a financial checkup can be a great way to help decide which accounts work for you and what your FDIC coverage is to help set you on a path toward achieving your goals.
