Client Questions: The Challenge of Low Interest Rates
12 Dec 2016
Hello again! It’s Matt from AskForMatt.com, and today, a client called me concerned about the low interest rates. Low interest rates are a positive for people borrowing for school, home improvement projects, cars and homes. However, for those interested in rate of return, these times can be difficult.
Let’s take a look around the world…we find that major economies, such as Japan, Germany and Switzerland all have NEGATIVE interest rates. So, when you put your money in the bank in these, and roughly a dozen other countries, you’re actually paying the bank to hold on to your money!
The number one financial instrument in Japan is a FIRE SAFE! Seriously! People would rather keep their cash in their house than put it in the bank. The reason this is happening is that the government wants you to spend money to stimulate the economy, rather than saving it.
This creates a money multiplier effect as it works its way through the system. Say what you want about the US economy, we still do not have negative interest rates. As you’re examining where you want your money to go, remember the difference between the US and other countries. A positive interest rate is better than a negative interest rate.
If you have any questions about positive versus negative interest rates or if it’s “OK” to get 1% on your savings or CD, just AskForMatt.com, because saving for retirement or your kids’ college education is more than just stocks and bonds.