Lousy Interest Rates = Spend

When the economy sucks, the government will generally lower interest rates so it’s more enticing for you to SPEND money rather than SAVE.

Well they’ve done that big time right now, and I did a little sleuthing around at some of my non-risk-bearing accounts.
About 5 years ago I set up an Emigrant Direct account because internet banks usually offer higher interest rates than most traditional banks…and I’ve pretty much forgotten about it.
I stashed away about $25,000 in that account and checked it recently to be greeted with:

1.2% annual return??? HAHAHAH!!

This means my roughly $25,000 will earn $300 for a whole year of sitting there. Meanwhile the inflation rate right now is “officially” between 3-4%….and in reality is probably much higher.

So while I earn $300, my money loses $750 in value (at least). The account is no longer a “No risk” account…it’s now a money pit.

Well that’s a losing proposition, so while I already have an investment account I use to throw into businesses that make me money, it looks like I’ll be almost forced to put some of that money to good use.

However with all the current tax breaks encouraging businesses to spend right now, taking money out of permanent savings accounts and spending them on money-making endeavors seems a smart idea right now.

Shopping spree time :-D

Blog posted on: January 28, 2010

8 comments on “Lousy Interest Rates = Spend

  1. Neville


    You are losing considerably if you have a normal bank account in the U.S….it's much better to invest that money (at least SOME) into business endeavors.

    If I take $25,000 and make $1,000 off it…I'm better off than leaving that money sitting.

    As for your venture into ecommerce…good going! At least you will learn an IMMENSE amount of knowledge you didn't previously have, you might actually make a good amount of money, and I'm sure you're figuring out that starting a business is pretty fun and rewarding.

    Have you read my post:

    Adam's recommendation to you for an ecommerce host was solid. Also try Volusion as an all-in-one solution.

    If you're going to sell lots of products use a proper ecommerce solution.

    Don't try to perfect your store right away, just get the damn thing running and working then make improvements from there!

  2. Money Honey SF

    I am not a huge fan of money market funds or CDs due to their low rates. If you're young like me, you should invest in stocks with a higher return in the long run. Banks offer you 1-2% return on your investment when they in turn lend out your money to others at a rate of 18%-22% such as credit cards.

    come and check out my blog moneyhoneysf@yahoo.com

  3. Zack

    Not checking the account for 5 years cost you some money as well. At once time EmigrantDirect had really good rates as well as a nice 1.4% cashback credit card. They have been going downhill for the last few years rate wise. Would have been better to move the money to different places and track it.


  4. John

    Hey Nev,
    Have you thought about putting your money in an overseas account? USA probably has one of the lowest interest rates in the world at the moment.
    I'm currently getting 3.90% in my savings account.
    Money transfer fees would probably make a fair hit but It would be an interesting calculation exercise to compare the benefits.

  5. Dale


    You know, I did read your posts on starting up an e-commerce site. I plan on reading it again now that I've sunk all that money into it. Actually, Shopify has a 30 day free trial thingy, so I actually haven't sunk anything yet!

    Thanks for the encouragement. You can't imagine how much that means to me.


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