|Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance.|
If COVID Has You Saving More, Make Sure You Are Doing So Wisely
By Britt Erica Tunick
The arrival of the COVID-19 pandemic has not only changed the day-to-day lives of the average American, but it has also changed the way people are spending and saving money. If you are among those who are suddenly squirreling away more cash, make sure you are doing so wisely.
When the sudden need for social distancing shut down countless businesses and industries across the country and led to massive layoffs, many people who managed to keep their jobs by working remotely worried that their positions could eventually be cut as well. As a result of this uncertainty and ongoing social distancing requirements, people are spending more time at home, and not spending money on things like eating out, gym memberships, entertainment, and new clothing. This increase in savings comes at the same time as interest rates linger at historically low levels.
While there are no true “high interest” savings accounts in the current environment, the difference between saving your money in a checking account or a low-yield savings account versus a high-yield account can still be significant over the long-term once you factor in compounded growth.
Another option to consider, particularly if you have money that you know you will not need to access in the immediate future, are Certificates of Deposit (CDs). A CD is essentially a savings certificate whereby you agree to lock up your money for a specified amount of time. In exchange for not withdrawing any of your funds within that time period, you receive a set amount of interest when the CD has matured. Although interest rates on CDs are also on the lower end these days, they are still significantly higher than the options for traditional savings accounts. CDs are available in a range of maturity terms, from as short as 21 days, to up to 10 years, with the interest rates rising the longer you agree to lock up your money.