Rising Rates, Silver Lining Part II 12/15/22

Hello NFC Clients and Friends,

Despite the poor precedent, I am re-hashing a theme posted only a couple of months ago: a silver lining adorns our rising rate environment! While I hope you were too busy living your life to notice that the Federal Reserve raised the targeted interest rate 50 bps to the highest level in 15 years, this FOMC maneuver does impact our lives in material ways. Were you to be one of my AP Macroeconomic students, you would have to suffer days of my excited facilitation of discussion, lecture, and inquiry of monetary policy and its role in our global economy. Thankfully, the semester is all but concluded, and there aren’t enough desks in my classroom anyway!

My most thoughtful, loving, and insightful wife gave me a T-shirt for my birthday almost a decade ago shortly after I inaugurated the first AP Macroeconomics course in my school/district. There is a simple but arguably profound quote that I have always found to be quite inspiring when counseling folks on matters of personal finance. While certainly debatable, it ultimately brings to focus that which we can control, and for that reason alone I find it to be a useful reminder: “There are macroeconomic problems, but only microeconomic solutions.” My wife knows me well.

Two months ago I wrote: “Yesterday I received my 6th email from Ally Bank in 5 months, and I was thrilled! On May 26th, I was notified that my online savings account rate was raised from 0.60% to 0.75%, and I did nothing to “earn” this 25% boost in my savings… I received 5 more of these rate hike emails from Ally, and it is still 3 months until Christmas!” At that time the interest rate was raised to 2.25%. Well, Santa is readying his sleigh, and a fistful of Ally Bank emails later customers received this today:

"Your Online Savings Account rate is increasing from 3.0% to 3.3% Annual Percentage Yield (APY) on all balance tiers. Your new APY goes into effect on 12/16/22..."

3.3%! This crushes the SECU’s Money Market rate at 0.7%, and checking account at 0.05%. For those of you who have been provided a NFC Action Items: Phase I— have you created your online savings account with Ally or another equally effective institution? Have you taken a step towards a microeconomic solution to a macroeconomic problem? If so, please share your experience in our discussion forum. If not, why not? It’s free money! And shouldn’t everyone enjoy the silver lining?

Yours in Financial Fitness,

David

https://www.normanfinancialcoaching.com/