Federal Reserve's recent interest rate cuts may help frequent credit card users, but it does nothing for people trying to build a cushion of savings.
The central bank announced on Wednesday that it reduced the reference rate by a quarter of a percentage point, it is a second-rate cut this year, and it can pinch the wallet, warns wealth advisers.
"From a savings perspective, interest rates hurt because banks generally pay lower interest rates on savings," John Sweeney, Head of Asset and Asset Management at Figure Technologies, told FOX Business.
However, a change in Fed interest rates or falls in the markets should not deter you from saving and making investments. Even if you earn less, you still earn something.
Here are some tips to help you grow your nest egg:
Add less to your checking account
For the monthly bills, try to keep only one to two months of consumption requirements on your utility account, Sweeney urged.
"You will earn very little from these funds, so try to keep a small buffer ̵
The Fed's interest rate cuts do not benefit savers.
Start an emergency fund now if you do not already have one
Save on a rainy day. People should have at least six months of living expenses in a liquidity account so that they can withdraw money without a deposit if necessary.
“Everyone gets a flat tire or breaks the glasses, and you have to spend money to get back on track that is out of normal monthly expenses. People should look for liquid accounts that are liquid and offer a high interest rate, ”Sweeney suggested, advising consumers not only to shop for the best return, but to keep track of it to ensure it remains competitive.
Track "excess cash" in your retirement account
It is important to be aware of any extra money you might have in a retirement account or other long-term savings accounts.
"Make sure that regular deposits in retirement accounts go straight into long-term funds that are consistent with your time horizon and risk tolerance," Sweeney said.
Don't change long-term savings targets
Don't let a change in interest rates change your long-term investment goals. If you are planning to buy a home and you have saved enough money to do so, do not stress with a short-term change in prices.
"Shop around for a competitive interest rate, with a convenient and comfortable borrowing experience, but don't forget the decision to buy a home because mortgage rates climbed last week," Sweeney suggested.
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