I'm sure the Fed thinks they're doing a good thing by keeping interest rates low, but it's not something as viewed as great by everyone. According to a recent MSN Money article, "Low interest rates stimulate the economy by persuading people to spend and invest. Unfortunately, those rates are also pushing senior citizens and savers into the risky stock market."
Now I'm not a senior, but I am a saver, and I'm ready for higher interest rates. I'm not talking about rates in the double digits like the country encountered in the 1970s and 80s, but I'm comfortable with a nice 5 to 7 percent range to get things bumping along. Here's why.
We're Debt Free
We've never been big fans of debt. We have a credit card, but we pay it off each month. We had student loan debt, but we paid nearly $50,000 off in less than three years. We've never had vehicle loans since we only buy cars that we can afford outright. Therefore, higher interest rates wouldn't affect us in how much we pay in interest on debt. Higher credit card interest, an adjustable rate mortgage, a home equity line of credit, or student loan rates won't affect us when it comes to debt, so it would be nice to have them affect us when it comes to investments and savings.
I love safe investments. I'd rather have more money in certificates of deposit and high interest savings accounts than in many stock or bond funds. However, finding such investment vehicles with decent associated interest rates isn't that easy when the prime rate is low. Our last CD -- into which we had temporarily deposited the majority of the equity from our first home sale -- was only earning 1.85 percent.
A little while after graduating college, I put some extra money into a 5-year CD earning around 6 percent. That was around 2001. And when we were saving the downpayment for our first home purchase in 2007, we were earning between 3 and 3.5 percent in a high balance, high interest savings account. Now, in 2012, we earning nothing on our savings and have put the money from our CD toward buying a home outright to avoid paying interest on a mortgage.
We're Not Looking for a Mortgage or to Take on Student Loans
Thankfully, since we're debt free and own our home outright, we're not looking to take on a mortgage or home equity line of credit right now. And since we've paid off our respective student loans and our kids still have at least a decade until they even start to consider which college they'll attend, we don't have to be concerned about associated interest rates there either. Therefore, without those as concerns, we wouldn't mind a hike in interest rates in order to open up a few more secure options in which our money could sit until we're faced with paying for college or upgrading our living situation to a larger home.
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More From This Contributor:
Peterson, Kim. MSN Money. "How low interest rates hurt seniors". December 14, 2012. http://money.msn.com/now/post.aspx?post=d6759455-97ff-4142-a066-e1793628a387