Kiplinger's Warns on High Rates
Kiplinger's writes, "Why You Shouldn't Let High Interest Rates Seduce You," which says, "[N]early half of all Americans (48%) said they are keeping more money than they should in cash because they're worried about a recession, according to the 2024 Q1 Quarterly Market Perceptions Study from Allianz Life Insurance Company of North America. More than half of Americans (57%) said they are keeping more money in a high-yield savings account (HYSA) or money market funds because of interest rates. Millennials, in particular, said they are holding more money in these accounts. While 62% of Millennials said they are keeping more money in high-yield savings accounts or money market funds because of rising interest rates, 50% of Gen Xers and 54% of Boomers said the same." The article tells us, "The allure of high interest rates can make it feel like holding cash in an HYSA is a wise financial move. Yes, you need to have cash for emergencies and unexpected expenses like car repairs, medical bills and other needs. You don't want to take on debt in order to cover those bills. So, your emergency fund should be kept in cash or another liquid asset. Beyond that, you need to keep your money for long-term savings working for you -- invested in the market. While some investments can be volatile in the short term, investments typically increase in value in the end." Kiplinger's adds, "While interest rates are high now, they may go back down. Moreover, we don't know when or by how much. So, for long-term growth, that HYSA may not cut it. Keeping money in cash could cause you to lose out in the end."
