Editor's Note: Do you have a question about your finances? Crosswalk.com welcomes financial columnist, Deborah Nayrocker. Deborah will be answering selected readers' questions in her monthly column. To submit your question, email us at: moneyquestions@crosswalk.com.  

 

Dear Deborah,

With interest rates on savings accounts and CD's so low, where do you recommend a relatively conservative person should invest?~ June

As a conservative investor, you probably believe that the return of your money is more important than the return on your money.

There is no doubt that, during this Great Recession, interest rates are reaching new lows. National deficit spending is hurting the economy. Bear in mind that a long time period of debt overindulgence and today's Federal Reserve policies to suppress yields on savings are playing a part in these lower rates. And we may be slogging through these rates for a while longer.

If you're seeking safety for your investments and you want to make a little more in interest, you may want to try this:

  1. See if you can get better interest rates at your financial institution. Ask questions: What are the different rates on your liquid accounts? What are your high-rate CDs and their yields? What are your money market account rates?

  2. Shop around for better interest rates. If you're not a member of a credit union, consider joining one. Credit unions typically have better interest rates than banks and earnings won't be eaten up with countless fees. Credit unions generally have lower fees or no fees for services. For example, our local credit union has no monthly fee for its money market accounts, including the money market checking and indexed money market account.

What is your time frame for investing? It's important to adjust for inflation risk - the risk of losing the purchasing power of your capital. After inflation and taxes, the yields can be very small. Consider diversifying your investments so you have a mix of asset classes. Check out the long-term growth of more conservative funds such as balanced funds and index funds.

Consider that this may be a good time to pay down debt. The Federal Reserve states that the total U.S. debt (not including the financial sector) is twice the amount it was 10 years ago, growing from $18 trillion to $35 trillion. Household debt has gone down only 3% from the all-time high figure of 2009. Source: The Wall Street Journal, August 2010.

August 27, 2010

Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. An award-winning writer, she is a guest contributor with www.CBN.com and a finance columnist with www.Crosswalk.com.  Deborah is the author of The Art of Debt-Free Living and the Bible study Living a Balanced Financial Life. Her Web site is www.artofdebt-freeliving.com.