A domino effect occurs each time the Federal Reserve changes interest rates. An increase leads to higher rates for consumers when they borrow, while paving the way to better returns for savings accounts. A decrease results in paying less interest when borrowing money, but also causes a drop in how much your savings can earn.
While waiting to see what the Fed does in 2024, consider having a plan in place for both these scenarios — a hike in interest rates as well as a cut. Here are some ideas for formulating your own financial plan for each scenario.
When Interest Rates Increase
Shop around for new savings accounts. Rate increases are good for long-term savers and families who are stashing away money for short-term goals like buying a home. When interest rates are on an uptick like they are right now, it’s a great time to shop around for a high-yield savings account or to lock in a great rate for a portion of your savings with a certificate of deposit.
Focus on paying down high interest debt. Rate increases can create disastrous results for people who have debt with variable interest rates. For example, data from the Fed shows the average credit card interest rate increased from 14.22% in 2018 to 21.19% in the second half of 2023. If high-interest debt is dragging you down financially, rate increases give you more incentive to pay it off.
Avoid borrowing when possible. Surging interest rates make borrowing money more expensive, so try and avoid borrowing for personal and business reasons. If you must borrow, attempt to exhaust every other source of cash before taking on new debt.
When Interest Rates Drop
Refinance existing debts. Look into consolidating or refinancing all your existing debts, including your mortgage, personal loans, and credit cards. Lower rates can help you save money on interest, secure a lower monthly payment, and help you pay off a debt’s balance more quickly.
Look for ways to put additional funds to good use. Lower interest rates make it less appealing to stash money away in savings account products, money market accounts, and certificates of deposit. Instead of savings accounts that feature little or no interest, look for ways to invest for the future or put your money to use for things you need.
Apply for funding. Rate drops also make borrowing money more attractive. Consider applying for a personal or small business loan, but only if you have a plan for it.
More than half the world now uses social media sites such as Facebook, X, and Instagram every day. The average user spends about 2 hours and 23 minutes on these platforms clicking, liking, and replying to content sent from around the world.
Research has demonstrated, however, that too much social media can have negative effects on mental health. This appears to be especially true for children and young adults. Here are some ideas to help ensure social media use does not become a problem, especially for your children.
Limit time. At least two separate studies have shown a correlation between more than two hours of daily social media use and negative mental health symptoms. Consider limiting your family’s use to less than two hours a day. Many in the tech community say no to their children using these social media platforms all together. Others require phones and electronic devices to be checked in when at home and restrict their use during the school week.
Set bedtime limits. Stop all social media use for at least one hour before bedtime. Then turn off all electronics and place them outside of bedrooms to avoid disruptions. Neither brightly lit electronic screens nor upsetting online content right before bed tend to promote restful sleep.
Discourage mobile use. If excessive social media use is common in your family, consider deleting the apps from your phones and only allow social media use from a home desktop computer. This will help you control the amount of use and avoid the distraction throughout the day.
No private social media. Ensure you have access to all social media accounts of your children and review them periodically.
Use real names. Having you and your kids use your real names and identities when using social media may seem risky, but experts at the youth social media advocacy group SmartSocial.com say it actually promotes positive use and avoids negative interactions and communities. It also helps teach kids to be responsible users who are conscious of the risks and consequences of online activity. But beware of the downsides as well. This includes targeted bullying and potential stalking.
Find real communities. Use social media to join communities devoted to your favorite hobbies and interests. Talk to your kids about the communities they’ve joined and the interactions they’re involved with to make sure they are using social media for positive experiences.
The traditional rule-of-thumb for emergency funds is to have enough cash stashed away to cover 3 to 6 months’ worth of expenses. For many people, though, this sounds better in theory than in practice.
When you’re starting from scratch and don’t have a lot — or any — extra cash at the end of the month, consider these ideas to help grow your emergency fund.
Cutting Expenses
Review recent statements to find opportunities to save. Look over your bank statements and credit card bills from the last few months to see where all your income is going. Spend some time tallying up expenses in categories you have some control over, such as entertainment, dining out, clothing and online shopping.
Cut down on lifestyle expenses. Identify areas to cut your spending and create new spending goals in categories that were problematic in previous months. Some of the easiest places to cut include online shopping, subscription services, clothing, movies and music. Once you reach your emergency fund goal, you can consider adding some of these spending areas back into your budget.
Spend less on food. One of the biggest budget busters for many families is their spending on food — both at the grocery store and at restaurants. Control food spending by making a meal plan and cooking most of your meals at home, shopping sales at the supermarket, and making meals with ingredients you already have.
Increasing Income
Squirrel away windfalls. Consider adding windfalls such as tax refunds, work bonuses, or annual gifts you may receive from a family member to your emergency savings as soon as you receive it.
Sell stuff you don’t need. Look around your home for items you rarely use and then sell unwanted stuff using an online marketplace. Used items that can fetch a good sales price include workout equipment, brand name clothing and accessories, small furniture and antiques.
Add a part-time job or side hustle. Boost your income by picking up more shifts at work, asking for overtime, or getting a second job or side gig to fill your spare time. This step can help you bring more money home so you can add to your emergency fund.
Once you start looking for ways to spend less and earn more, there’s one final step that can help you grow your emergency fund. Make sure the money you find on both ends of the spectrum makes its way to your savings, either through manual or automatic transfers.
The best way to do this is by having a dedicated emergency fund in an account that’s separate from your regular checking and savings accounts. By moving your extra money into this account, you can grow your emergency fund with less temptation to spend it.
